Skip to main content

Full text of "Southeast Asia and the economy of the free world; a report"

and the econo 
of the free wo 




SOUTHEAST ASIA 

AND THE 

ECONOMY 

OF THE 

FREE WORLD 



April 1952 



A Report by the Foreign Commerce Department Committee of the 
CHAMBER OF COMMERCE OF THE UNITED STATES 






FOREWORD 

This study continues the series of reports by the Foreign 
Commerce Department of the Chamber of Commerce of the 
United States on various important areas of the world. In form 
and treatment "Southeast Asia and the Economy of the Free 
World" represents a departure from earlier studies. There are 
several reasons for this: the importance of Southeast Asia to 
the free world extends far beyond the purely economic; concern 
over the future of this corner of Asia is based on more than 
raw materials, strategy, or manpower. 

The emphasis on the history of the countries treated in 
this publication is due to the desire to bring into focus the major 
problems of Southeast Asia, interrelated and interdependent 
as they are. 

Although neither the historical nor the economic sections 
attempt to treat each subject exhaustively, it is hoped that this 
study will give the reader a better-than-birds-eye view of this 
part of the world which is so far from us in miles and in culture; 
Southeast Asia has recently become important to the survival 
of the free world, of which it still is a part. 

An Appendix lists the members of the Foreign Commerce 
Department Committee (with the members of the Southeast 
Asia Subcommittee marked with an asterisk) under whose 
guidance this document was prepared. 

■ 
KENNETH H. CAMPBELL 

3 Manager 

*"' Foreign Commerce Department 

a. i 

LU • 

tn • 



s& 



IT) 

CD 

CD 
<M 






726304 



Library 
University oi Texas 

Austin 



Table of Contents 



PAGE 

Map of Asia and the Far East vi 

Facts at a Glance vii 

Introduction — Fateful Southeast Asia 1 

I. THE PROBLEM 

Choosing Sides 2 

Ghosts of the Past 2 

Independence Is Not Easy 2 

First Things First 3 

H. THE SETTING 

Historical Outlines 

BURMA 

The Look Back 4 

British Burma 4 

Modern Burma 5 

THAILAND 

The Early Years 6 

Modernization of Thailand 7 

Constitutional Monarchy 8 

Government Policy 8 

The War and Its Aftermath 9 

MALAYA 

The Growth of a Colony 10 

The Outnumbered Majority 10 

Union or Federation 11 

Singapore 11 

The War Years 11 

Postwar Chaos 12 

Came the Revolution 12 

INDO-CHINA 

What Is Indo-China? 13 

Early History and the Growth of 

French Rule 13 

The Growth of Nationalism 13 

The Second World War 14 

Postwar Chaos 14 



INDONESIA page 

The Background 15 

The Early Days 16 

The Growth of Nationalism 16 

Self-Government 17 

The War Years 17 

Postwar Developments 17 

Partial Agreement 18 

The Dutch and Indonesia 18 

Economic Ties 18 

The Pattern of Trade 

Domestic 20 

Foreign 20 

Natural Resources of Southeast Asia 

General 21 

BURMA 

Agriculture 22 

Minerals 23 

Hydroelectric Power 23 

THAILAND 

Agriculture 24 

Minerals 24 

Hydroelectric Power 25 

MALAYA 

Agriculture 25 

Minerals 25 

Hydroelectric Power 26 

INDO-CHINA 

Agriculture 26 

Minerals 26 

Hydroelectric Power 26 

INDONESIA 

Agriculture 27 

Minerals 27 

Hydroelectric Power 28 

Note on Source Material 29 

Bibliography 29 





























^^ 




























< 








<v 

3 


















m 


c/s 

s 






i> 


_s 


















p 


^ 




s 


•O CO Q» O J3 

oo i-h i-h co-S 


'3 
> 

03 


as 
















h3 

3 


o 

(3 
as 




03 


■-HO T3 

a 


O 


a 


o 


o 


O 


o 


o 


o 


o 

43 


CJ 

a 






i-i i— i 


s 


o o 


3 


a 


3 


a 


a 


3 


"55 




























C8 
< 












„,T3 
















o 

w 




=0 








0) « s 
















4h 




to 

s 

o 


co o tNS\ 




a 


independ 
within th 
Netherla: 
Union 
















o 

45 




*C3 
s 


-OS 
»« 00 


© 


as 

*ot 

o 


to 








CO 




OT 


S 






00 t- 


GO 

se- 


§ 


>> 


o 
a 


O 

3 


o 
a 


4) 
>> 


O 
3 


4) 


if 
o 
C 




-oa 








^43 




















Associated State 
of Indo-China 


o co JS^-Sn 

O ■* 00 o* 

-OS 
CO fc- 
00 ©* 
t5* 


al 

03 
1—1 

"3 

!> 
03 

O 

3 


^a 

I.I 

;§«2 
-g a 

a o 


semi-independen 
within the Frenc 
Union 


o 


o 

a 


o 

3 


o 
a 


CO 

as 

>> 


CO 
4) 


4) 
O 
3 
o3 
f-i 

43 
60 
3 
O 

Si 

„3 


C 

SP 
"S 



CO 

as 

GO 

C5 
43 


LU 

u 
























4-> 


3 


























*n 


z 


"& 


















<N 






C3 
> 


< 


fe5 


CO 

42 

'3 

03 














M 




w 


as 
43 


—1 

o 
< 


ederation 
Malaya 


0,850 

6,307 

50% 
40% 
dians 10 


oslem 
(Malays^ 


a 
o 










43 

3 
o 

43 




43 
tD 
3 
O 


4J 

as 
as 

CO 

as 
> 
o 


1- 

< 


fen 


lO 3 

I-H 


o 
3 


^ 


*3 
cs 


o 
a 


o 

3 


o 
a 


o 
a 


o 

3 


43 
■i-J 


-3 
C 

a 
as 


CO 


























% 

a 


(— 










, 
















u 

< 

LL. 


^3 

s 


■* CO O^tN 




•a 

co 

ia 


sndent 

tutiona 

rchy 
















'B 

o 
o 
o 




g 


i-H OS «s «J 

"CO I-H 

O t- 


CO 


T3 
T3 

3 

PQ 


ftV> 3 

D IB g 

fl B O 


OT 


OT 


CO 




OT 


CO 




'% 

>* 






O i—l 


00 


.a 8 a 


0) 


4S 


OS 


o 


4) 


4> 


O 
3 


a 
as 




























bo 




























< 




























^ 




























*H 












+j 
















S 












a 
















as 






«5 O O^S^- 




a 

^3 


0) 

3.2 

cp i — 1 
















as 
c/s 

"3 . 




61,7 

18,3 

98 

1.8 


oo 

00 


T3 
3 

pq 


o«2 

as 3 

-c ft 
a d 
.a h 


OT 

as 


OT 

OS 


OT 

CJ 


o 


OT 


O 


OT 

as 


3 T3 
-^ ■— 
3 P3 






©* 


«©■ 


>i 


>» 


>> 


a 


>> 


a 


>> 


os M 2 




























43 ±2 




























-T O Mh 






















































=35 O W 




























rt ° ta 




























^3 






T3 






















sJ s 






OS 

-t-J 






















2g „ 

C3 to 3 


















u 














Area, square miles 
Population, 000 om 

total 

native 

Chinese 


tional income 
capita, 1949 


pi 
o 


OT 

3 
03 

co 

_cs 


P 
ft 

OT 
4S 

a 


42 

a 
» 

a 


4s 

42 

a 
a 

M 

a 

o3 

PP 


h- 1 
3 


4) 
O 

3 

o3 

. m 

'ot 

CO 

03 


'3 

03 


>> 

h 
O 
■u 

o3 
3 

.SP 
"co 

H 
H 


1 Beginning with J 
f technical nature, 

- No ECA allotme 






£1 


'as 
Ph 


Ph 


OS 


I— I 


o 


'8 

Ph 


V 


i 




o 






FATEFUL SOUTHEAST ASIA 



THE Korean war and the "Great Debate," together 
with the inquiry into the dismissal of General Mac- 
Arthur, have focused attention on Asia. This im- 
mense area, having within its realm extremes of climate, 
topography, and cultural heritage, is not only the cradle 
of mankind, of historical importance without peer, but 
also is today the focal point of our fears and our hopes. 

On American policy toward this continent may hinge 
the fate of Western Civilization. The word "policy" 
should not be interpreted in the narrow sense, but rather 
in the full meaning of the word, with its implications of 
economics, politics, history, strategy, and sociology. 

Asia is in ferment. Of her more than 1.3 billion people 
about 670 million are living today under the heel of the 
dictator. The other peoples of Asia are restive. With 
the desires for political independence and economic im- 
provement of their lot, feelings of nationalism run high. 
Communism has begun to exploit these desires and aspi- 
rations, and the free world must act. 

In the area of Asia which is not yet a vassal of the Rus- 
sian bear lies a tremendous potential of resources, both 
human and material. America, in association with her 
allies, must realize this potential and put it to work for 
freedom and human dignity. 

Any policy, whether formulated in the conference 
rooms of governments, or in the offices of businessmen, 
must be based on knowledge; knowledge not only of the 
economic resources and their possible development, but 
of human resources as well. 

Southeast Asia is in many ways the mirror of the larger 



Asia, with its differences in cultures, land, and resources, 
and a very worthwhile purpose will be served if this 
report can throw some light over this troubled area of 
the world. 

Area to be Covered and Scope of This Study 

To most economists and geographers, Southeast Asia 
usually means the countries of Burma, Thailand (Siam), 
Malaya including Singapore, French Indo-China, and 
Indonesia. It is intended that this study restrict itself 
to these countries. 

The earlier studies made by the Foreign Commerce 
Department of the Chamber of Commerce of the United 
States, under the guidance of the respective committees, 
have dealt with investment opportunities abroad, and 
with the interdependence of the foreign and the U. S. 
economies. The lower degree of economic development 
of Southeast Asia, its status as a producer of raw mate- 
rials, and the relative lack of adequate statistics on the 
area, suggest the preparation of a more general study.. 

The still partially colonial status of Malaya; the new 
relationship between Indochina and France; the recent 
emancipation of Burma and Indonesia; and development 
of a constitutional monarchy in Thailand, suggest an ap- 
proach which would first give a background to a study 
of the area and the countries comprising it. Highlights 
of the political development of the countries will be 
followed by an outline of the economic and strategic im- 
portance of the area to the United States and the rest of 
the free world. 



1 



I. THE PROBLEM 



SOUTHEAST Asia, with its diverse languages, cul- 
tures, and economies, is beset by the same ambitions, 
frustrations, and problems as the rest of the world. 
Rampant nationalism, born from oppression not always 
exercised by colonial powers; racial minority disputes 
more serious than those obtaining in many parts of Eu- 
rope or the Americas; demands for political emancipa- 
tion; economic injustices aggravated because of the de- 
pendence on world market prices; all these must be con- 
sidered and studied. Thoughtful Americans must rea- 
lize that Southeast Asia demands our attention and our 
understanding. 

Choosing Sides 

A hard fight will be waged over the alignment of the 
peoples of Southeast Asia with either of the two major 
power blocks in the world today. The free world as well 
as the communist block need the wealth of raw mate- 
rials produced in the region. World demand for the tin, 
the rubber and the copra is increasing; despite the mir- 
acles of chemistry, for many years to come Southeast 
Asia will be an important supplier of raw materials for 
industry. Beyond the purely economic importance of the 
region, the West can suffer a severe blow if its human 
resources were to fall under the hammer and sickle. 
Southeast Asia straddles the sea lanes between Europe 
and Japan, China, Australia and New Zealand. Loss of 
this area to communism would endanger India, Pakistan 
and Ceylon on the west, and Australia and New Zealand 
on the east. 

Strategy, no less than human or material considera- 
tions, requires the free world to understand the aspira- 
tions' of the peoples of Southeast Asia for freedom and a 
greater share of the world's material comforts. These 
aspirations are intimately associated with the drive for 
independence from colonial rule. We must realize that, 
rightly or wrongly, the nations of Southeast Asia feel that 
the improvement in their standard of living can only be 
achieved by independence and nationalistic economic 
policies. We must acknowledge the fact that the pres- 
tige of the former colonial masters has gravely suffered 
under the defeat by the hands of Japan. The success of 
some of the nations in gaining independence has in- 
evitably reinforced the will for independence among the 
nations not yet free. 

Ghosts of the Past 

The prestige of the "White Man" has not only suffered 
due to the weakness of his defense against Japan, but also 
by his background of colonial rule. In the struggle for 



the soul of Southeast Asia, the non-Soviet world has lost 
many battles, victory going to communism by default. 
However, the struggle is not yet over, and the free world 
must prove to the people of this region that communism 
is not the answer to their desires. We must show them 
that succumbing to Soviet influence will only exchange 
one foreign master for another, that victory for freedom 
and human dignity and for a better way of life lie with 
the democratic world. 

The problem for the United States, as a leader in the 
struggle against world communism, is complicated by 
the fact that among our allies in this conflict with com- 
munism are the former colonial powers. Support by the 
U. S. for the maintenance of the status quo in Southeast 
Asia will inevitably be attacked with the cry that the 
U. S., the cradle of freedom and democracy, is aiding the 
cause of colonialism. 

Even if the United States is concerned about the 
spread of communism in Southeast Asia, that does not 
necessarily mean that the Southeast Asians will be equally 
concerned. To the masses of Southeast Asia knowledge 
of democracy as we know it is as hazy as is knowledge 
of communism. Lack of knowledge means lack of oppo- 
sition or support. Not knowing the danger of commu- 
nism makes opposition to it difficult. 

Those free to choose lean to the democratic freedoms, 
changed and adapted to the culture and the economic 
realities of the East. The appeal of communism, where 
it does exist, stems from the promises of economic salva- 
tion, from resentment against the former colonial powers, 
and from communism's call for action, the chance to do 
something now. 

Too hasty attainment of complete independence of the 
nations of Southeast Asia, without adequate preparation 
for it, may well result in the rupture of long established 
economic ties of great importance to the former colonial 
nations and their nationals, and therefore to the free 
world. The result may well be political and economic 
chaos which could easily play into the hands of com- 
munism. 

Independence Is Not Easy 

The successful creation of an independent democratic 
state does not automatically produce political maturity 
in its citizens. The great mass of people of the region 
still live in a civilization in which the family and the vil- 
lage is the most important political unit. Illiteracy and 
lack of communications are formidable obstacles to po- 
litical development even remotely similar to democracy. 
Independence requires effective government; and effec- 



tive government requires technicians. Administrative 
efficiency, even of the most rudimentary sort, cannot be 
created overnight. The colonial administrations of most 
of the countries of the area did not usually delegate much 
responsibility to the indigenous people. Those fortunate 
enough to get an education usually concentrated on books 
rather than on tools, on philosophy rather than agricul- 
ture. Their aim was a white collar job, not to be the 
leaders of their communities at home. Thus their num- 
ber, increased beyond the demand for clerical employ- 
ment, served to create a group of intellectual malcontents, 
easily prone to accept any doctrine, however fallacious, 
which would promise them the millennium. The villages 
and land holdings felt little of the stimulus of improved 
agricultural methods and new cottage industries, had 
education fulfilled one of its primary functions. 

In the U. S., our radio, our telephone, and our daily 
paper have become universal disseminators of news. In 
most areas of Southeast Asia these media are present only 
in the larger urban developments, and even there the 
indigenous population has little access to them. While 
educational facilities remain in their present limited 
state, the education and enlightenment of the farmer 
living on the subsistence level of the values of democracy 
and the dangers of communism, remain a far distant goal. 

First Things First 

At present the people of Southeast Asia do not need 
better plumbing, they need rudimentary sanitary facili- 
ties; they require not a tractor for their farm or electric 
light for their house, but a better hoe, a better plow; they 
need simple lessons in soil conservation. In the educa- 
tional field the need is less for universities, although they, 
too, are necessary; the essential need is for the one-room 
schoolhouse where an adequately trained teacher can 
teach his pupils the rudiments of the three R's, who can 
show them by example how to make simple things, how to 



improve their sanitation and their health, their house and 
their land. Only by thus improving their lot can the 
people of Southeast Asia afford to devote a little less of 
their time to self-preservation, and a little more to the 
production of goods which will increase their wealth. 

Even at the present low standard of living, population 
pressures in the countries of Southeast Asia are increas- 
ing. The rapid growth in populations is not accompanied 
by a commensurate increase in the production of food- 
staples; improved sanitation and health will only accen- 
tuate population pressures. As a higher standard of liv- 
ing leads to a higher birth rate, at least until the economic 
development of the area has become mature, so will im- 
proved health and sanitation lead to a lowered death rate. 
For many years the rate of population growth will in- 
crease, bringing with it new problems, political and eco- 
nomic, for which solutions must be found. Physical im- 
provement in the living conditions must be accompanied 
by strenuous efforts to improve the productivity of the 
soil. In most of the countries treated in this study the 
yield per acre is only a fraction of what it is in Japan. 
Continuance of the position of Southeast Asia as a net 
surplus producer of rice despite an increasing population 
is one of the major problems to be dealt with. 

Concrete help by example at the grass-roots level can 
solve most of the fundamental problems of Southeast 
Asia. This help must have many facets: not only land 
reform but the creation of facilities to help the farmer and 
the worker escape permanent indebtedness; not super- 
highways, but a dirt road that is passable all year; not 
the building of huge industrial complexes, but the crea- 
tion of a cement factory or cottage industries. 

The foregoing is an indication of the complexity and 
magnitude of the problem of Southeast Asia. For the 
development of a consistent and wise policy for America 
we must be aware of the problem. For this purpose a 
knowledge of the lands and the people and their history 
is essential. 



II. THE SETTING 



HISTORICAL OUTLINE OF BURMA 

The Look Back 

The history of the ancestry of the indigenous people 
now inhabiting Burma is buried in antiquity. It is sur- 
mised that the Burmese people are descended from 
mongoloid races of Tibet and western China who wan- 
dered south into a warmer, less forbidding climate. The 
thin veneer of Chinese culture present in Burma seems 
to be a fairly recent acquisition; despite the mongoloid 
origin the main foreign cultural influence came from 
early Buddhist India. 

Not until about the thirteenth century, when Burma 
was conquered by Tartar invasion, did the Chinese make 
a slight imprint on Burmese culture, although even be- 
fore the southward migration of the Burmese the area 
acknowledged a loose suzerainty of Yunnan. The rela- 
tionship with China remained faint and tenuous, and 
•the various tribes inhabiting what now is Burma and still 
living in isolation and at a low level of cultural develop- 
ment, were little deserving of intensive Chinese attention. 
; Although the Burmese are the dominant and most 
numerous, there have remained in the jungles and moun- 
tains tribes which have kept their identity and language 
and have never been absorbed into the general racial 
pattern of the Burmese people. The Karens, perhaps 
the more ancient inhabitants of lower Burma, had been 
enslaved by the Burmese and made little cultural progress 
until the British lifted their yoke and Christian mis- 
sionaries spread education. Other tribes are the Shans, 
about one million strong living in eastern Burma, the 
Kachins in the north, and the Chins in the northwest. 
Despite the general use of the Burmese language, there 
are still 11 language groups and 126 subsidiary dialects 
spoken in Burma. 

Early Burmese contacts with foreign nations, whether 
India or China, were restricted to water-borne traffic and 
trade along the coastline, the mountains being effective 
barriers to communication. The religion of Buddha came, 
about the tenth century, with the establishment of tempo- 
rary Indian trading colonies along the coastline and 
lived on even after Buddhism was no longer a major re- 
ligion in India. 

The distinct Burmese culture of today developed largely 
out of the Buddhist religious influence and is strongly 
flavored with early Indian culture. Modern Burmese 
writing descends from the ancient Sanscrit. 

The evolution of Burma into a nation with its own 
culture and language without succumbing to the influ- 
ences of overpopulated India and China is largely due 
to two factors: the inaccessibility of Burma from all 



sides but the ocean, and the fighting prowess of the 
people. The kingdom of Burma developed largely in 
the central area of what we call Burma, far from the 
sea, and, despite the small size compared with its most 
important neighbors, it has survived to this day as a 
national entity. 

The consolidation of the various tribes inhabiting the 
area of Burma began in the eleventh century. Intensive 
internal wars were finally decided in favor of the Bur- 
mans, who consolidated the petty states into the Bur- 
mese nation. A feudal dynasty, Burma remained rela- 
tively isolated from the world until the outbreak of the 
first Anglo-Burmese wars (1823-26), although initial 
contacts had been made with the British East India 
Company, and French and Portuguese traders and 
pirates. 

British Burma 

The Anglo-Burmese wars began with a retaliatory 
British expedition into Burma for an attack on East India 
Company trading posts. Small areas of Burma were put 
under British domination, and in these areas rice pro- 
duction was extended, and teak wood was exploited. As 
resources of teak were exhausted, and as the Burmese 
continued to harass and attack the British, a series of 
wars, lasting until 1886, extended the area of British 
control until all Burma was under British colonial rule. 
Administratively, Burma was placed under Bengal, and 
thus was part of British India until 1937, when Burma 
was given a British-made constitution, similar to India's, 
and was administratively separated from India. 

Under British rule, major economic advances were 
made in Burma as the country was opened up to the 
commerce of the world. Vast increases in rice produc- 
tion were attained, permitting large exports as well 
as providing sufficient rice for domestic consumption. 
Exploitation of teakwood, the later development of 
lead and zinc mining, the production of tungsten and 
tin, and petroleum drilling, made commercial invest- 
ments extremely profitable for the British. Although 
the British administration was instrumental in estab- 
lishing sound fiscal management and regulated the tax- 
ation of trade and commerce, little of the profits incurred 
remained within the Burmese economy. Much of the 
labor, made up largely of Indians and Chinese, was not an 
assimilated part of the population. Not only was the 
labor force composed of aliens, but the trade also was 
in the hands of foreigners, generally Chinese and Indian. 
The indigenous population was largely occupied with the 
production of paddy rice. 

Burmese resentment of foreign rule was not only 



directed against the British but also against the Indians. 
Burma was a part of British India, and there were no 
limits on the immigration of Indians. The latter not only 
contributed largely to the labor force, but also were 
instrumental in starting absentee landlordism, a phe- 
nomenon which was unknown in Burma in pre-colonial 
days. 

The old customary law of Burma provided for the 
headmen of the village to settle disputes by arbitration. 
Compromise was the rule, and one important feature 
was that no farmer could be deprived of his land. 
When British rule was extended over Burma, it carried 
with it British legal principles, paramount of which is the 
sanctity of contracts. As Indian money lenders extended 
loans to the Burmese, frequently under usurious terms, 
many rice farmers were chronically in debt, and eventu- 
ally, were deprived of their land. This contributed greatly 
to the feeling of insecurity and hostility toward British 
rule. By 1936, more than half of the farm land was under 
absentee ownership and operated by tenants. 

Nationalism, the drive toward self-determination and 
independence, received a new impetus during and right 
after the first World War. In India the National Con- 
gress was emerging as a new force in the British colonial 
empire. The doctrine of the right of self-determination, 
so clearly enunciated in Europe, awakened national aspi- 
rations among dependent peoples in Asia. 

The British realized the danger of denying the Bur- 
mese people the right for ultimate freedom much longer. 
A separation from India was regarded as a first step to- 
ward the slow evolution to independence, although the 
British hoped that Burma would remain within the frame- 
work of the Empire. In 1935 an act was passed which pro- 
vided for partial self-rule of the Burmese, under the 
tutelage of the Governor, who retained final veto power. 
Several states of Burma were excluded from the parlia- 
ment then established and remained under complete con- 
trol of the British-appointed governor. The constitution 
which became effective in 1937, although not satisfying 
the nationalist leaders, did provide important legal au- 
thority for self-government. 

However, the political maturity of Burma was not suf- 
ficiently advanced to permit effective self-government 
even in limited terms. Graft and corruption and a grave 
deterioration of the civil service weakened the country, 
aided by a series of anti-Indian riots. These riots, caused 
by the British refusal to prohibit unrestricted Indian im- 
migration, led to a large degree of lawlessness and defi- 
ance of all authority; these scars on the body politic are 
still much in evidence and have been aggravated by con- 
ditions under the Japanese occupation. 

Various nationalist groups developed, all bent on pro- 
moting Burma's independence and complete sovereignty. 
Some of these movements, aided in their cause by Japan, 
became responsible for the pro-Japanese orientation of 



Burma during the war years, and a number of; their 
leaders actively collaborated with the Japanese. 

Shortly after the Japanese victory over the British a 
puppet regime was set up. Not only its officials but large 
parts of the population believed that their national as- 
pirations would only be achieved under Japanese hegem- 
ony. The Japanese were, after all, not the hated West- 
erners; but it soon became evident that Japan gave only 
lip-service to the Greater East Asia Co-prosperity Sphere; . 
the brutality of the occupation soon alienated the na- 
tionalist groups which had collaborated with the Japa- 
nese. Internal resistance groups developed, of which 
the most powerful was composed largely of youths be- 
longing to the "Anti-Fascist People's Freedom League". 

Although partially influenced by communists this group 
was sufficiently politically organized to play an impor- 
tant role in the postwar period. The desire for political 
independence of the Burmese nation overshadowed all 
considerations for economic rehabilitation which the 
British government had been planning. A short-lived mili- 
tary government was replaced by a civil governor, but 
reconstruction of the Burmese economy was rendered 
impossible by the increasing demand for untying the 
bonds between Burma and the British Commonwealth. 

The dominant political group in Burma was the Anti- 
Fascist People's Freedom League of which General Aung 
San was the leader, respected and supported by many 
factions of the Burmese political scene. By the latter 
part of 1946 Aung San had become the head of a more 
representative Executive Council under the governor, 
better representation having been effected through 
friendly negotiations. A threatened strike, fostered by 
communists in the AFPFL, was avoided by the leader- 
ship of Aung San, and when communist agitation per- 
sisted communists were banned from the AFPFL. Aung 
San believed in negotiation and compromise to bring 
about the independence of Burma and compromise was 
violently opposed by the communists as well as ultra- 
nationalist elements. Negotiations in London, in early 
1947, led to an agreement which provided for the estab- 
lishment of Burmese independence within one year. 

Relative stability of the Burmese government was 
rudely shattered with the assassination of Aung San 
in June 1947, and political unrest and defection of many 
members from the dominant party ensued. 

Modern Burma 

Nevertheless, Thakin Nu, successor to Aung San, car- 
ried negotiations to a climax in the Nu-Attlee agreement, 
which provided complete independence of Burma out- 
side the British Commonwealth, but Burma remained 
within the sterling area. Britain cancelled most Burmese 
government obligations to her, and through Burma's 
membership in the sterling area, allowed her access to 
dollars out of the area's dollar pool. In return Burma ob- 



ligated itself to respect British contractual relationships 
with the Burmese economy. British investments were 
not to be expropriated without prior negotiation for 
mutually satisfactory settlement. In addition, Britain 
was to assume certain defense training activities for 
Burma. No British troops, however, were to remain on 
Burmese soil, and the war against the insurgents has been 
carried out by the government of Burma. With the bene- 
fits of complete sovereignty, Burma also assumed the 
responsibilities. 

The attainment of independence on January 4, 1948 
was followed by civil disorders. Communist demand 
arose for complete severence of all relations with Britain, 
and the defense arrangement and the protection of British 
investments in Burma were subjected to especially severe 
criticism. 

Although the Communist Party was outlawed in March 
of 1948, after the premature disclosure of plans for open 
rebellion, revolt broke out shortly afterward, and the gov- 
ernment lost effective control over large areas of Burma. 

The civil war was not confined to communist rebel ac- 
tions, but the various minority groups, importantly the 
Karens, were distrustful of the Burmese hegemony. Age- 
old distrust of the ruling group made the smaller minority 
groups cooperate with the Karens, and communist sym- 
pathizers led other rebellions. The Burmese army, largely 
consisting of Karens, suffered serious defections, and the 
Burmese economy, never recovered from the Japanese 
occupation, took a turn for the worse. The establishment 
of effective control over the areas of communist and 
Karen unrest took strong measures which could be exer- 
cised only by a strong government. No such government 
existed. 

Internal political conditions in Burma have remained 
chaotic, with the Karen rebellion, aided and abetted by 
communists as well as by lawless bands, flaring up and 
subsiding periodically. The main reason for the Karen 
uprising can be found in the Burmese constitution of 1947, 
which provided for separate states for several of the 
other minority groups but neglected to give the Karens 
the same rights. The reason advanced for withholding 
statehood from the Karens was that they were so inter- 
mingled with other minority groups that the creation 
of a homogeneous Karen state was regarded as not 
feasible. 

As the unsatisfied demand for Karen separatism con- 
tinued, the Karens no longer regarded statehood as satis- 
factory and demanded complete independence. By now 
the Burmese government was willing to accede to the de- 
sire for a separate state for the Karens but refused to con- 
sider complete secession. 

Since March 1949 accusations have been made that the 
Karens have been aided by Red China as well as Soviet 
Russia, and, although large areas of Burma have again 
come under government control, the rebellion has not 



been suppressed. The drop in the production of rice, 
which long had been one of the principal sources of reve- 
nue for the government, had caused severe governmental 
deficits and attendant instability. 

Anarchy seems to be increasing and the position of 
Burma is becoming ever more vulnerable. The non- 
communist Karens are carrying on their fight for inde- 
pendence, while communist insurgents still control some 
regions of the country. Transport is unsafe, and the au- 
thority of the government continues to be challenged. 
The communist group has split into two factions, the Red 
Flag and the White Flag. They are fighting independ- 
ently of each other, but suspicion points to Red China 
aiding both groups. 

More recently accusations have been made by the 
U.S.S.R. and Red China that a small remnant of Chinese 
Nationalist troops, perhaps 10,000 strong, and confining 
their activities to the tri-state area of southern China, 
northeast Burma and northern Thailand, was being sup- 
plied and led through the contrivance of Thailand and 
the United States. To the unstable Burmese government, 
this is a new concern. Trying desperately to placate Red 
China and more distant Russia, without alienating the 
non-communist nations, the existence of Chinese Na- 
tionalist troops in her territory means to Burma possible 
provocation for attack by Red China, although the activi- 
ties of the Nationalist troops have not been consequential. 

Her fear of provoking the wrath of Red China has 
caused Burma, perhaps only temporarily, to reject even 
continued U. S. economic aid by refusing to sign the nec- 
essary aid agreement. Burma is fearful and suspicious of 
American motives. However, realizing the need for co- 
operative action of the countries of South and Southeast 
Asia, Burma earlier decided to join in the Colombo Plan, 
thus in effect drawing her closer to the orbit of the British 
Commonwealth which the young republic left in 1948. 

HISTORICAL OUTLINE OF THAILAND 

The Early Years 

The political history of Siam, now called Thailand, 
properly starts with the migration of Thai peoples from 
southwestern China in the thirteenth century. This 
migration, materially aided by the Mongol conquests of 
Kublai Khan, soon brought the Thai into control of the 
numerous kingdoms and tribes which then made up the 
area now Thailand. Development of the Siamese nation 
paralleled the intermarriage of the various races in the 
area; the first real king of Siam emerged in 1350. 

The young nation was given no period of peace to set- 
tle down and work out its own destiny, but launched into 
a series of wars to the east and to the west. To the east 
the Siamese invaded Cambodia and it took them over a 
century to gain hegemony over part of this area. To the 



west, Siam engaged in almost constant warfare with 
the Burmese, and the northern areas of Burma as well as 
the Malay peninsula came under strong Siamese influ- 
ence. 

Culturally, the Siamese state was orientated toward 
Buddhism, and adopted Chinese political institutions. The 
language, a relative of early Indo-Chinese languages, is 
essentially monosyllabic, and has adapted the written 
alphabet of the Cambodians. 

The first commercial contact with the western world 
was established with Portuguese traders in the sixteenth 
century when a Portuguese trading station was estab- 
lished, and a little later with Dutch traders. As early as 
1664 the Dutch sought to gain a hold over Siamese for- 
eign trade by the negotiation of a commercial treaty with 
" Siam, but this attempt was foiled by French intrigue. 

In the latter half of the eighteenth century Siam suf- 
fered a Burmese invasion which destroyed the capital and 
which brought Siam under Burmese rule. In 1782 Siam 
threw off the Burmese yoke and founded a new dynasty 
under Bama I. Descendants of Rama, the so-called 
Chakri dynasty, still rule present-day Thailand, although 
the absolute monarchy gave way to a constitutional one 
in 1932. 

Under Rama I, Siam was again on the ascendancy, de- 
feated Burma after a long series of wars, and won control 
over parts of Cambodia by dividing it with Annam, al- 
though a few decades later Cambodia came altogether 
under Siamese control. 

Early in the nineteenth century (in 1826) Siam entered 
into a commercial treaty with Great Britain, and shortly 
afterward with the United States. Although these treaties 
were far from perfect instruments (for instance, making 
no provision for the establishment of consulates), they 
are significant because of the assurance of the independ- 
ent status of the Kingdom of Siam. 

Modernization of Thailand 

The first wave of strong European influence came over 
Siam under King Rama IV. This ruler (1851-68), who 
had spent many years as a Buddhist monk, had studied 
extensively the scientific lore of the more advanced coun- 
tries, and introduced western-type government in his 
kingdom. He started the serious modernization of Siam, 
and realized the benefit to be obtained for his country 
through greater contact with the outside world; he was 
instrumental in negotiating a number of more up-to-date 
treaties with Great Britain and the United States, and, 
shortly afterward, with many other powers. These trea- 
ties generally gave the foreign signatories a wide range of 
trading and diplomatic rights in the kingdom. 

The only major setback that Siam suffered under its 
enlightened ruler was loss of control over Cambodia 
which became a French protectorate. However, the 
modernization of Siam was carried on under the rule of 



his son, who brought about more governmental reforms. 
Not only did he abolish slavery, set up a centralized civil 
service, and introduced modern taxation methods, but he 
also allowed the establishment of telegraph and railroads, 
and a modern postal service. 

In the late nineteenth century Siam was in a special 
position in Southeast Asia. On the one hand France was 
extending her sphere of influence on the Asian continent; 
on the other, Great Britain was anxious to maintain the 
independence of Siam as a buffer state between Burma 
(which then was administratively a part of British India) 
and the French possessions in Southeast Asia. Although 
Siam attempted strong measures, following border clashes 
with the French along the Cambodian border, she capitu- 
lated after the imposition of a blockade by the French. 
The blockade was the result of a rejection of an ultima- 
tum, which in turn was caused by the attack of Siamese 
artillery upon French gunboats. In the Franco-Siamese 
Treaty of 1893 Siam gave up all claims to territories east 
of the Mekong river, and paid an indemnity to France. 

British concern over the Siamese question led to 
strained relations with France, and the issue was not set- 
tled until 1896 when the British recognized the French 
claims against Siam. Although the size of the effective 
buffer state between Burma and the French possessions 
was reduced, the Anglo-French agreement guaranteed 
the independence of Siam by both signatories. 

The following years were characterized by a series of 
negotiations between France and Siam and Great Britain 
and Siam which resulted in a number of territorial adjust- 
ments and the eventual abandonment of extra-territorial 
rights in Siam. These rights pertained to the jurisdiction 
of the British and the French, respectively, over any of 
their subjects in Siamese territory. 

Although it was not until 1927 that Thailand (then still 
Siam) gained complete juridical autonomy, the first move 
toward this greater independence came during the first 
decade of the twentieth century. Extra-territoriality had 
been granted to foreign powers by treaty right, and these 
treaties frequently granted extensive trading and travel- 
ing rights without any commensurate benefits to Siam. 
For instance, the United States did not grant Siam tariff 
autonomy and did not surrender its extra-territorial rights 
until 1921. 

In 1936 Thailand denounced all existing treaties and 
proceeded to negotiate new ones with most of the major 
powers. It was only then that Siam gained her place in 
the family of nations as a completely equal, sovereign and 
independent state. 

The period 1910 to 1925, under the reign of Rama VI, 
was characterized by further development of the western- 
ization of Thailand: the calendar was changed from the 
Buddhist to our Gregorian system, irrigation was begun, 
and education was modernized. 
An interesting fact is the declaration of war by Siam 



on Germany in 1917. Some historians interpret this step 
as a sign of maturity; the declaration of war was imple- 
mented by the dispatch of a Siamese expeditionary force 
to France, and Siam became one of the original members 
of the League of Nations. It should therefore occasion 
no surprise that Siam became an early member of the 
United Nations, being admitted to the U.N. in 1946. 

Constitutional Monarchy 

Thailand left the rank of absolute monarchies in 1932. 
Siam was suffering from the effects of the world depres- 
sion, and King Rama VII studied ways in which he 
could make the government of his country more respon- 
sive to modern demands. With the advice of an Ameri- 
can, Raymond Stevens, he studied various draft constitu- 
tions with the intent of creating a constitutional mon- 
archy. However, he was not allowed to carry through 
his plans. In June of 1932 there took place a bloodless 
.revolution, culminating in the proclamation of a constitu- 
tion. The political party which engineered the coup 
d'etat called itself the Peoples' Party, despite the fact that 
the revolution was not of a popular character but was 
instigated by a small group of western-educated Siamese 
with the help of the military. 

.';, The king now became a constitutional rather than ab- 
solute monarch. Habit was hard to break, and the civil 
service, still monarchists at heart, were able to undermine 
the political power of the Peoples' Party; accused of com- 
munist leanings the party was outlawed. The govern- 
ment, however, could not maintain order, and a series of 
revolutions, all relatively unbloody and swift, finally re- 
sulted in the abdication of the king in favor of his school- 
boy nephew, Ananda Mahidol, then living in Switzerland. 

A council of regents ruled for the new king, who did 
not actually ascend to the throne until after the war. 
Upon his assassination, in 1946, his younger brother in- 
herited the crown and is now King of Siam. Despite a 
number of constitutional changes and several new con- 
stitutions, paralleling the frequent changes of govern- 
ments in Siam, the king regained no great powers, and 
rules with the advice and consent of the Siamese parlia- 
ment. 

Military coups, minor revolutions, and struggles for 
power have obscured the fact that the political develop- 
ment in Thailand has not led to multi-party rule. Essen- 
tially, the. parties, whether officially recognized or not, 
are really the followers of individual political leaders, 
and, with few exceptions, the political power has gener- 
ally been vested in one faction or another of the Peoples' 
Party. One of the obstacles to the development of new 
parties in Siam has been the constitutional provision for 
the absolute control of the government by one party until 
sufficient political maturity had been attained to make the 
emergence of new parties safe. This has assured the self- 
perpetuating power of the Peoples' Party. 



Government Policy 

Much of the Siamese governments' policy since the 
early thirties has been nationalistic. There has been 
strong emphasis on the Buddhist religion and on teaching 
the Siamese language to the Chinese and Malay minori- 
ties in an attempt to foster patriotism and allegiance to 
their new home. There has been a steady growth of Chi- 
nese immigration into Siam, despite all efforts of the gov- 
ernment to stop it. The Siamese feel that the large influx 
of Chinese is a threat to their own identity as a Siamese 
nation. For many years the Thai government has at- 
tempted to force the Chinese to conduct their own schools 
in Siamese and teach Chinese only as a foreign language. 
The efforts to assimilate the Chinese, however, have been 
generally unsuccessful. 

Although the problem of the Malay minority, fairly 
strong in the part of Siam extending into the Malay Pen- 
insula, has not been as serious, the government has also 
tried to assimilate the Moslem Malays, with little success. 
Since there is no great flow of Malays across the Malaya- 
Siamese borders, thus not creating a major problem, the 
Malays have usually been able to resist the occasional 
incursions into their cultural and religious separatism. 

Although the original revolutionary government, in 
1932, advocated a large measure of state ownership and 
control over the Siamese economy, the plans were never 
fully carried out. Nevertheless, the government did take 
over a number of industries and business enterprises. 
Part of the reason for the governmental interference lay 
in the desire to wrench economic control over the Siamese 
economy from the hands of the Chinese and the Euro- 
peans. Where possible, the government installed Siamese 
and let them run the enterprises, but it was not always 
successful in doing so. In many instances, the govern- 
ment simply took over, and then employed the same peo- 
ple who had formerly run the institution. 

For a number of years the difficulties placed in the 
path of foreign enterprises were so formidable that most 
foreigners left. After the war there was some relaxation 
of this policy, but for most enterprises the Siamese gov- 
ernment requires a minimum 51 per cent Siamese partici- 
pation, and in many fields the Siamese government has 
insisted on ownership. 

The future economic policies of Thailand are quite un- 
certain, due to the recent repudiation of the constitution 
of 1949, and the return to the powers of the constitution 
of 1932. This earlier document, which never had been 
effective, gives the government greater executive powers, 
and allows the control of the press and political freedoms 
to a much greater degree than the more liberal constitu- 
tion of 1949. 

One of the major problems of postwar Thailand has 
been political instability. Since the end of the war there 
have been more than ten different governments. How- 



8 






ever, the policies of each one of them have not changed 
too much, a new one carrying out the responsibilities of 
its predecessors fairly closely. 

The confusing change of name from "Siam" to "Thai- 
land" to "Siam" and back is largely a reflection of 
nationalistic feelings. The first switch had been made 
when the Thai, or Siamese, insisted on the official 
change from "Siam" to "Thailand" in 1939. To the 
Siamese their country had always been "Muang Thai", 
the "Land of the Thai", and they themselves have 
been "Thai". This name continued in effect until after 
the war, although it was not generally accepted through- 
out the world. After the war the Thai reverted to the old 
name in order to remove a minor point in the negotia- 
tions for a peace treaty with the British. In May 1949, 
the name was again changed officially to Thailand, and 
the name of the people to Thai. This time the change 
was generally accepted, although occasionally one still 
finds references to Thailand under "Siam". 

The War and Its Aftermath 

In 1938, after one of the many changes of government, 
Thai-Japanese relations grew closer, due to a realistic 
appraisal (from the Thai point of view) of the growing 
power of Japan. After the invasion of Southeast Asia had 
begun the friendly relations were not continued, however, 
and the Japanese decided to occupy Thailand. The brief 
attempt at resistance proved ineffective, and shortly after 
the occupation, Thailand declared war against Great 
Britain as well as the United States. The latter, believing 
that the declaration of war was not an expression of the 
sentiment of the Thai people, did not recognize the dec- 
laration of war, and therefore the U.S. never declared war 
on Thailand. Only a small but powerful minority, in- 
cluding the present Prime Minister, Pibul Songgram (then 
also Prime Minister) favored the declaration of war 
against the Allies. 

After the Japanese surrender the declaration of war 
was repudiated by the Thai government, and in August 
of 1947 preparations were made for the adjudication of 
the relatively minor U. S. claims for settlement of war 
damage. Except for a small number of corporate claims, 
requiring by their nature more preparation, U. S. claims 
were finally settled in 1948, at the rate of about 70 per 
cent of the amount of damage demanded; all things con- 
sidered, this was rather fair and prompt settlement. Brit- 
ish claims, considerably larger than the American ones, 
required the setting up of a claims commission; British 
interests in Thailand have been much larger than U. S. 
ones, and therefore the settlement of claims was a more 
involved matter. 

The return to power of Pibul Songgram, the Premier 
who had been in office at the time of the declaration of 
war against Great Britain and the United States, was one 



of the more "revolutionary" periods in Thailand's postwar 
history. During the war, some of the moves of the pro- 
Japanese Premier Pibul were unpopular and led to his 
overthrow and the establishment of a new government in 
1944. The new Premier and his supporters were able to 
establish an anti-Japanese underground, supported by the 
Allies. Many of the facilities were finally not used, but the 
government finished the war in the good graces of the 
Allied powers, and stayed in power until after the war 
when intrigue and turmoil again dominated the political 
arena of Siam. In typical Thai fashion, the revolutions, 
changes of government, and military coups detat were all 
bloodless and relatively peaceful. 

By the end of 1947 Pibul Songgram, after having earlier 
been acquitted of being a war criminal, mainly because of 
no specific violation of any law, overcame his fear of pos- 
sible unpopularity with the western powers. Staying in 
the background, Pibul Songgram organized a new coup, 
in the usual bloodless manner, and his political fortunes 
were again in the ascendancy. The changed government 
was soon declared legal, and was staffed with a number 
of able and respected men. Shortly after recognition had 
been extended to the new government by the Allied pow- 
ers, Pibul had himself declared Prime Minister again, a 
post which he has been able to hold since, despite various 
military upheavals, including the last, successful, one, in 
December of 1951, when the old government was over- 
turned and Pibul was again named Prime Minister of the 
new cabinet. His return to power had been aided by the 
regents who represented the crown for the absent king. 
Of the countries of Southeast Asia, Thailand is the most 
prosperous one, and although the standard of living of the 
Thai is not high, it is higher than most of their neighbors', 
with the possible exception of Malaya. Communism does 
not seem to have gained an important foothold in the 
country, and the existing danger stems from the strategic 
position between weak Burma and Indo-China. Should 
either of these fall into communist hands, either from in- 
ternal or external assault, the position of Thailand would 
be extremely serious. A look at the map will make Thai- 
land's exposed position quite clear. 

Thailand's position is not made easier by her recogni- 
tion of the new states of Vietnam, Laos, and Cambodia, 
which, by indirection, means opposition to the communist 
regime of the Viet Minh. In addition, Thailand continues 
her recognition of Nationalist China rather than Commu- 
nist China, a recognition which was extended only very 
shortly before the war. Until then, despite important 
trade relations, and many difficulties with the Chinese 
minority in Thailand, China and Thailand had had no 
official diplomatic relations. 

Although the United States has extended some military 
and economic aid to Thailand under the Mutual Security 
legislation, financial interests of United States business 
enterprises has remained comparatively small. British 



interests continue to be the most important foreign eco- 
nomic ties with Thailand. 

HISTORICAL OUTLINE OF MALAYA 

The Growth of a Colony 

If the Malayan coat of arms consisted of a tin dredge 
and a rubber tree, then her lucky charm would be the tin 
can and the rubber tire. In 1880 still in the backwash 
of the rich Singapore trade, in a few decades the Malays 
gained the highest standard of living in Southeast Asia. 
Malaya is a fascinating example of the impact of modern 
technological development on a primitive agricultural 
society. 

Occupying the lower, bulbous third of the Malay pen- 
insula, the Federation of Malaya is the only one of the 
Southeast Asian countries still, in effect, in colonial status. 
The position of Malaya in the British Commonwealth is 
really an anomaly: never having been a colony, the nine 
Malay states making up the Federation of Malaya have 
retained an essentially colonial status. Singapore, a 
Crown Colony, is in many ways more independent. 

Originally Singapore was established for its strategic 
position on the sea lanes between the Occident and the 
far orient, to break the quasi-monopoly of the Dutch 
East Indies trade. The Malay hinterland was for Singa- 
pore and for the British a wild jungle occupied by the 
Malays and ruled by a large number of oriental poten- 
tates. Today Singapore's greatness without the rich tin 
and rubber trade would be impossible. Singapore and 
Penang to the northwest were purchased in the form of 
an annual grant to the respective ruling sultans at the end 
of the eighteenth and early nineteenth century. 

The Port of Singapore developed as a transshipment 
point and waxed rich and prosperous on the growing 
trade with the Far East. British interference in Malay 
affairs was almost non-existent and the internal feuds be- 
tween the various Malay States guaranteed the continu- 
ance of the status quo. 

Although tin mining began to flourish prior to the last 
quarter of the nineteenth century the British did not 
begin to exert control over the absolute rulers of the 
Malay states until the last quarter of that century. Then, 
the British embarked on their new imperialist adventure 
in a very peaceful and legal way: they negotiated treaties 
with each of the sultans under the terms of which these 
potentates agreed to accept the advice of British coun- 
sellors. The arrangement proved satisfactory to the Malay 
sultans because their prestige remained unimpaired, in 
fact there was some security attached to their hereditary 
positions due to British backing. British control was exer- 
cised generally through persuasion and this was sufficient 
to bring about widespread reforms and generated a cli- 
mate in which the Malay economy and British invest- 
ments could grow and flourish. By the end of the nine- 

10 



teenth century Malaya was no longer a backward jungle 
but it had become an important source of the world's tin 
and the almost sole producer of rubber. 

The Outnumbered Majority 

As Chinese and Indian labor was imported to work 
in the tin mines and on the rubber estates ( Malays largely 
working the small holdings) the problems of health, of 
malaria control, and of labor troubles required faster re- 
form which could only be accomplished by greater British 
influence. Without a change in the status of the various 
treaties, British governmental authority became greater 
while the power of the sultans declined. The Chinese mi- 
nority, active politically and economically, grew until the 
Chinese approached the Malay population in number. 
They established themselves not only in the labor groups, 
but, as in other parts of Southeast Asia, they entered the 
retail and wholesale trade, the exporting and importing 
and the money lending profession. Shrewd and frugal, 
they gained an economic stranglehold on the country 
without becoming assimilated or losing the ties with their 
homeland. Chinese investments, before the war, ran a 
close second to British investments of one-fourth of a bil- 
lion dollars. U. S. investment was less than 30 million. 
The Indian minority, less numerous and less powerful 
economically, nevertheless was important enough, to- 
gether with the Chinese, to render the Malays a "minor- 
ity" in their own country. The Malays being of a race, 
culture and religion similar to the Indonesians of the 
island of Sumatra, the Hindu Indians and the Buddhist 
Chinese are not only foreigners by nationality, but are 
foreign in every sense of the word. The problem of citi- 
zenship and political responsibility is not two but three- 
cornered. Those Chinese born in Singapore could be 
British subjects as well as Chinese nationals. 

The Malays naturally did not favor giving political 
power to any group which culturally and legally owed 
their allegiance to a foreign power. The economic 
strength of the Chinese did not salve the wounds. Al- 
though until the middle thirties there reigned relative 
harmony among the three races in Malaya, the British 
realized this dilemma and found little advantage in ac- 
tively seeking to establish the independence of Malaya. 
Another problem confronting the British in Malaya is 
the movement for union with Indonesia, with which Ma- 
laya has culturally much in common. The postwar period 
has not eased the tension in Malaya nor has it instilled 
in the British any new fervor for expediting the break- 
away of the largest net dollar earner in the whole Sterling 
Area. Before the second World War this financial consid- 
eration was of much less importance: the British would 
not have suffered any financial strain through the eman- 
cipation of Malaya and the latter would probably have 
found it advantageous to lean on British power for 
protection. 






Union or Federation 

Although her dollar needs makes Britain more depend- 
ent than ever on Malayan exports to dollar areas, political 
reality has now forced her to pursue more actively the 
goal of eventual self-government and independence for 
Malaya, hopeful that Malaya will stay in the Common- 
wealth. 

One plan, conceived in London, to separate Singapore 
and Malaya, and to grant certain political privileges to 
the Malays as well as to the Chinese and Indian popula- 
tion in the nine Malay states, was put into effect in 1946, 
when the Malayan Union was established. Under the 
Union scheme the Malay sultans were deprived of their 
last vestiges of power, and the Chinese and Indians were 
given Malay citizenship without renouncing other al- 
legiances. The conservative Malays objected on the basis 
that they would be outnumbered by foreigners in their 
own homeland, the Indian population and the Chinese 
together constituting more than 50% of the population of 
the Union. Malay opposition was strong enough to make 
the British scrap this plan and substitute a new one, the 
Federation of Malaya, which is still the present organiza- 
tion of the Malay states and includes the former British 
settlements of Penang and Malacca. 

The Federation came into force in February 1948, after 
consultations between the British, the Malay sultans, and 
a new political organization of Malays, the United Malays' 
National Organization. Authority is delegated to a High 
Commissioner appointed jointly by the King of England 
and the Malay sultans, and there is an appointed legisla- 
tive council and an executive council on the federal level. 
In each state the sultan rules, as before, with the advice 
of a British consultant, but in matters pertaining to Mos- 
lem religion and custom the sultans' powers are absolute. 
In state matters,' the sultans are assisted by an executive 
council, and a council of state. 

The establishment of the Federation assured the sultans 
much of their former power and satisfied the Malay de- 
mands for tighter citizenship requirements. For the 
Chinese and Indians it meant that their goal of a voice, 
however small, in the political affairs of Malaya was 
pushed further into the future. 

The British claim that differences regarding citizenship 
are now being ironed out and that definite plans are being 
made for the ultimate political emancipation of Malaya. 
Another hopeful sign is a new political organization, 
which, although mainly Malay in nature, has strong sup- 
port from some Malaya-born Chinese. The plans of this 
group, still vague, call for a seven year program to achieve 
the independence of Malaya. If these plans materialize, 
and the problem of citizenship can be ironed out, the 
development of political democracy in Malaya is possible. 
A start has been made, also, in developing political 
responsibility by planning elections which are to be held 



in the near future. Beginning on the local level, these 
elections will lay the groundwork for a larger share of 
responsibility to be borne by the people. 

Singapore 

Singapore, a Crown Colony with a high degree of re- 
sponsible government, used to be called the Straits Settle- 
ment, which included Penang and Malacca. Upon the 
establishment of the Malayan Union, Singapore was sep- 
arated from the two other settlements which became part 
of the Malay Union and the later Federation. In the 
political fortunes of Malaya, Singapore has played a 
special role, partly due to the fact that the island of Sing- 
apore is populated with a much larger percentage of 
Chinese than Malaya proper. The outright incorporation 
of Singapore in the Malayan Union would have made 
the Chinese the majority group in Malaya, a condition 
favored neither by the British nor by the Malays. 

Singapore grew rich as a free port. Although no longer 
free of all restrictions on trade, the tariff barriers are 
lower than those prevailing in Malaya, and Singapore's 
position as a transshipment port of major importance in 
the Far East might be compromised were she to become 
an integral part of Malaya. Since Singapore is politically 
a great deal farther advanced than Malaya, and boasting 
a partly elected legislative council, the special status of 
Singapore will probably be maintained for a long time 
to come. 

The War Years 

As in other areas of Southeast Asia, the war has shat- 
tered the myth of the invincibility of the colonial powers. 
The British had never found it expedient to create a 
Malay army, except a small contingent serving with the 
British. The people on their part relied on the British for 
protection through sea and air power. An invasion from 
the north seemed unlikely as long as the power of the 
British navy and the well fortified port of Singapore pre- 
sented visible evidence of British supremacy. 

The early capitulation of Thailand and the loss of Indo- 
China to the Japanese changed all this. The British were 
busy fighting the Battle of Britain and had lost much of 
their naval strength in the Pacific through the sinking of 
the battleships "Prince of Wales" and "Repulse". They 
could not spare the necessary troops and aircraft for an 
effective defense of Malaya or Singapore. The few troops 
that were sent as reinforcements suffered cruelly in the 
jungle fighting in which the Japanese had become expert. 

On February 15, 1942, Singapore surrendered, and the 
conquest of Malaya was complete. Although the Japanese 
tried hard to win support from the Malays, they failed 
completely. They were regarded the oppressors despite 
all propaganda about the "Greater East Asia Co-Pros- 
perity Sphere." The occupation of Malaya had several 
important implications for the future: the Malays were 

11 



stirred up in their latent hatred against the Chinese, and 
the feeling of nationalism was fostered. An active under- 
ground was organized, sparked mainly by the Chinese 
communist elements, but supported to some degree by 
the Malays and by Chinese with Nationalist sympathies. 
As in other countries of Southeast Asia, the communists 
spearheaded underground activities against the Japanese 
and thus gained popular support among the native popu- 
lation and provided lenient treatment after the war. 

Another effect of the Japanese occupation was the de- 
gree of lawlessnes*s which prevailed in Malaya following 
the war. Although the British were welcomed with open 
arms, Malay antagonism against the Chinese produced 
violence and riots which were difficult to suppress with 
an inadequate police force. The Japanese surrender had 
left much of Malaya a shambles; food was scarce, and 
social and health services were disrupted. The British 
sought to purchase rice for the Malays, but the usual 
sources for Malay rice imports, Burma and Thailand, 
were unable to supply sufficient amounts. 

Postwar Chaos 

The shortage of food and clothing and of other con- 
sumer goods, the inevitable black markets, the rising 
prices, were all designed to make the work of the com- 
munists easy. They were eager to prevent the economic 
recovery of Malaya and fomented serious strikes. Armed 
bandits, not always communist, roamed the country side 
and instituted a reign of terror that took strong measures 
to suppress. Armed troops had to be used and the police 
had to be strengthened. 

Malay communism is not indigenous and has been gen- 
erally strongest among the Chinese. The large floating 
Asian population and the fact that Singapore, under Brit- 
ish rule was a haven for political refugees of all complex- 
ions, have made Malaya a fertile haven for communism. 
The Malays, largely farmers, have been generally dis- 
interested in communism. Following the war the Chinese 
faction split into two hostile camps: those who followed 
communism and those who remained loyal to the Nation- 
alists. During the war the communists made important 
gains by coming into control over many of the labor 
organizations and trade guilds. 

Although the communists came out of the war with a 
good reputation, they did not feel strong enough to risk 
open revolt. Instead they not only infiltrated the existing 
labor organizations but organized new ones, frequently 
forcing laborers to join by intimidation. The economically 
unsettled conditions favored them and they gained 
strength rapidly. They were aided by the freedom of the 
press, and the freedom of organization which existed in 
Malaya, and the rampant inflation made the demands for 
higher wages a call to arms. Several attempts at a general 
strike failed and it was not until 1948 that the communist 
revolt broke out. 



Came the Revolution 

The British were caught unprepared, having regarded 
the development of labor movements, and the demands 
for higher wages as part of a genuine trade union move- 
ment. It took them some time to realize that the aim of the 
communists was to set up an independent communist 
state. 

Beginning with a series of strikes and killings, the 
uprising in 1950 was staged by a force of 4,000 to 5,000 
communists, mostly Chinese. Their raids on plantations 
and villages, staged from the jungle fastness, are continu- 
ing to this day, interrupting the economic life of the 
country, and tying down a force of 17,000 British troops, 
10,000 Indian Gurkhas, and a Malayan police force of 
more than 200,000. Although the guerrillas have not been 
able to stop the production of tin and rubber, raids on 
estates, killing of planters, and general insecurity are 
taking a steady toll of lives. 

The inability to cope with the problem of guerrilla war- 
fare is largely due to one factor which has nothing to do 
with the military aspects of the Malay uprising. The 
guerrilla forces have been able to maintain themselves, to 
replenish their manpower, and to provide food for them- 
selves, with the support of Chinese squatters. These 
Chinese communities, frequently isolated, make use of 
unused land and supply labor for some of the nearby tin 
mines and rubber estates. Sometimes voluntarily but usu- 
ally through intimidation and coercion, they supply the 
guerrillas with arms and food. Although attempts were 
made to guard the communities of the Chinese squatters, 
it was impossible to prevent the guerrillas from attacking 
the Chinese on their way to work or during their labors 
in the fields or estates. It was impossible to prevent smug- 
gling of food and weapons to the guerrillas hiding in the 
jungles. A new plan had to be tried. 

The so-called Briggs plan has resettled more than 300,- 
000 squatters in new communities where they are out of 
range of the communists, and where effective control over 
them can be exercised. After resettling about three 
quarters of the total number of squatters estimated to be 
living in the Malay states, the plan has been a success. 
The building of new housing, new compounds, and pro- 
viding work for the squatter, has been an expensive and 
time consuming effort. Aside from reducing the strength 
of the terrorists, the plan has meant the rehabilitation of 
the Chinese squatters, both economically and socially. 
The program is carried on, despite the difficulties. The 
influx of a new wave of Chinese into several of the Malay 
states, as the squatters are being consolidated into larger 
communities, has aroused some opposition but the success 
of the Briggs plan has silenced criticism. 

Heretofore, there has been little evidence of any out- 
side support for the Malay communists. If no foreign help 
is forthcoming, there is hope that the guerrillas may be 



12 



defeated, although the fighting will be long and arduous. 
The jungles are dense hiding places; it is dangerous and 
time-consuming to flush them from cover. 

HISTORICAL OUTLINE OF INDO-CHINA 

What Is Indo-China? 

To most Americans Indo-China means confusion. Not 
only confusion in reading about the fight against com- 
munism, but also confusion about the names of the new 
states and the old, about their role in the community of 
nations, and their lingering connections with France. 
To some degree the lack of knowledge about Indo- 
China (formerly called French Indo-China) was the 
direct result of French colonial policy. French interest 
in this area, financial and political, was exclusive. For 
France, her Far Eastern possessions, prior to World 
War II, were lucrative sources of income, expanding 
markets for French goods, and important sources of 
raw materials. 

Today's interest in Indo-China, aside from the recent 
events of political emancipation, arises out of the 
strategic position which Indo-China occupies in hold- 
ing Southern and Southeast Asia against communism. 
If Indo-China were to fall, the last important rampart 
against the red hordes would be breached, and the future 
of the other countries of Southeast Asia would be dark. 

Present Indo-China is a newly born creature in the 
family of nations. Politically, three separate states, 
Vietnam, and the Kingdoms of Laos and Cambodia 
are, as the Associated States of Indo-China, members 
of the French Union. They are legally independent and 
have been recognized as such by the United States, 
Great Britain, and about thirty other countries. Sov- 
ereign in their foreign relations, they "coordinate" their 
policies with France, but are completely autonomous in 
the conduct of their internal affairs. France has com- 
mitted herself to granting complete independence within 
the French Union, but the transfer of authority is slowed 
by the fact that the countries are not yet entirely able 
to take over all of the tasks and responsibilities of 
complete sovereignty. 

The three states of Vietnam, Laos and Cambodia are 
today political reality. There are older geographic and 
political identities, however, which still persist in usage, 
and a word of explanation may be in order. The state 
of Vietnam, running in a narrow strip north and south 
from the Chinese border to the tip of the Indo-Chinese 
peninsula, consists of the former protectorates Tonking 
(now North Vietnam), Annam (now Central Vietnam), 
and the former French colony of Cochinchina (now 
South Vietnam). The other two Associated States, Cam- 
bodia and Laos, (both kingdoms), were formerly also 
French protectorates. French hegemony was established 
in 1863 over Cambodia, and in 1893 over Laos. 



Library 
University of Texa 

Early History and the Growth of French Rule Austin 

Historically, the boundaries are quite recent, the area 
of Indo-China having been fought over and divided 
since time began. The very name, Indo-China, gives us 
a clue to the background of the culture. Essentially a 
battleground of Chinese and Indian cultures, traces of 
both are found, with Chinese influence paramount. 

At the beginning of the nineteenth century most of 
Indo-China was ruled by the Emperor of Annam who 
acknowledged the loose overlordship of the Chinese 
empire. French missionaries had been active in Indo- 
China since the early seventeeth century, and had been 
allowed free rein. The nineteenth century, however, saw 
frequent persecution of Christians and on many occa- 
sions the missionaries were forced to leave the country. 

This unfriendly attitude of the Annamite court led to 
a joint French and Spanish expedition, in 1858, which 
ultimately resulted in the abandonment of parts of 
Cochinchina to France. Supervision of the new colony 
was extremely loose, most of the actual administration 
having been left to the local mandarins. 

Cambodia, a Hindu state constantly endangered by 
both Thailand and Annam, decided to accept the pro- 
tection of the French in 1863. The French foothold in 
Indo-China grew and was soon extended further by the 
annexation of more of Cochinchina. Gradually, by force 
and by treaty, French influence spread over the rest 
of what is now Indo-China; by 1884 effective control was 
exercised over Annam, and by 1893 the French acquired 
a protectorate over Laos, long disputed territory between 
Thailand and Annam. By the turn of the century, French 
control had been intensified, and the French inaugurated 
reforms and administrative changes which both, bene- 
fited the region, and tightened French control. The 
French possessions in Indo-China were united in a tariff 
union which has been maintained to this day. 

The Growth of Nationalism 

Chinese influence is very strong in Indo-China, par- 
ticularly in Vietnam; the language as well as the gov- 
ernmental structure, religion, and art borrowed heavily 
from the Chinese. The peoples west and south of the 
Annamese mountain chain, which forms the barrier be- 
tween Laos and Vietnam parallel to the coast, have 
been influenced to a greater degree by Indian culture. 

The peoples of the region are a tangle of races after 
centuries of infiltration, changed boundaries, and minor 
migrations. Vietnam, the most populous of the nations, 
is inhabited by 22 million people, most of whom are 
Annamites, although a Chinese minority has played an 
important role in supplying labor, as well as constituting 
a large percentage of the urban population. The popula- 
tion of Cambodia is about 4 million, including a small 
Chinese minority and about 10 per cent Indo-Chinese 



726304 



13 



other than Cambodian races. About 1.5 million inhab- 
itants live in sparsely settled Laos, of whom the majority 
are Lao. 

In the mountainous areas of the back country there 
are many tribes of much more primitive development 
than that attained by the peoples living in the lowlands. 
The most important of these are the Thai and Moi, 
although particularly in Vietnam (North and Central), 
there are several other tribes enjoying special status. 
Among these are the Tho, the Man, the Meo, the Nung, 
Nhang and the Lolo. 

The struggle for national identity and for independ- 
ence in Indo-China has had a long history. The improve- 
ments which French administration has undoubtedly 
wrought, have also weakened the family ties and com- 
munal customs without introducing many of the benefits 
of modern civilization. French rule, often enlightened 
as far as economic and social benefits were concerned, 
did not prepare for the eventual independence of her 
Asian colonies; on the contrary, official policy was to 
draw the units of the French empire closer together 
under the dominance of the mother country. The few 
instances in which some measure of self-government was 
granted were obscured by the large executive and veto 
powers retained by the French administration. The 
amount of self-rule granted was not comparable to the 
degree of home-rule granted many of the British and 
Dutch colonies and dependencies. 

Hence, nationalist movements, frequently aided and 
abetted by local communists, gained an early foothold 
in Indo-China, despite the efforts of the French, some- 
times by brutal duress, to squelch these movements. 

It should be mentioned here, that the movement for 
independence was mainly Vietnamese in nature, and 
the desire for the independence of Cambodia and Laos 
have only been recent developments. 

The Second World War 

As in other instances in Southeast Asia, the drive for 
independence was greatly enhanced after the early vic- 
tories of Japan during the second World War. Even 
before the defeat of France by Germany, Japan had 
begun to exert military pressure on the French posses- 
sions in Asia, and the French defenses were weak. The 
strategic position of Indo-China made it a prime target 
for Japan, both as a base for a pincer movement on 
China, and for later attacks on the Dutch and British 
possessions in Southeastern Asia and the Southwest 
Pacific. In addition, Indo-China was a rich prize in terms 
of raw materials. 

During 1940 and 1941, the Japanese were able to exact 
a number of concessions from the French. With Japanese 
pressure a move by Thailand to regain some of her 
lands lost to the French during the nineteenth century 



succeeded and France ceded parts of Laos and Cam- 
bodia to Thailand. By the middle of 1941 all of Indo- 
China was in Japanese hands, but the French colonial 
administration was retained. Although instances of active 
and willing collaboration with the Japanese were rare, 
an effective underground movement against the Japanese 
was rendered impossible due to the fear of the French 
that it would foster the development of native independ- 
ence movements. 

Any attempts by the remaining French forces to pre- 
pare for cooperation with an eventual Allied landing 
were foiled when the Japanese announced the end of 
colonial rule of Indo-China in March of 1945. This was 
followed immediately by the declaration of independence 
by Emperor Bao Dai of Annam and the Kings of Cam- 
bodia and Luang Prabang (one of the eleven provinces 
of Laos). Later the French recognized the King of 
Luang Prabang as King of Laos. 

Postwar Chaos 

From then on, the mainstay of resistance against Japan 
was organized by the Viet Minh League (League for 
the Independence of Vietnam) under the leadership of 
the communist and nationalist Ho Chi Minh. After the 
surrender of Japan, the Viet Minh formed a provisional 
government under Ho Chi Minh's presidency and de- 
clared the independence of Vietnam. There was a lot of 
popular support for this move which was originally by 
no means entirely communist but rather expressed the 
latent desire of the people for independence. This new 
state, Vietnam, included Tonking, Annam (of which 
Bao Dai was still king) and Cochinchina. 

Toward the end of World War II the relative weakness 
of the French, both in Europe and in Asia, had led to 
the agreement, between the Allies, that Indo-China 
would be occupied partly by the British and partly by 
the Chinese. When the British arrived in Saigon, Cochin- 
china, they refused to deal with the then established 
Vietnam government but helped the French to regain 
power. The latter were soon able to recapture control 
over the cities, and by 1946 they were able to exercise 
effective administrative and military control over most 
of the territories south of the 16th Parallel, which had 
become the dividing line between the Chinese and 
British occupied parts of Indo-China. 

The Chinese, on the contrary, had left Ho Chi Minh 
in control of their zone of occupation and did not sur- 
render it to the French until they were able to get 
concessions on the treatment of the Chinese in Indo- 
China, and special concessions on the Yunnan railroad. 

France was now again the sole foreign power in Indo- 
China, but her position was neither secure nor simple. 
In the north she faced hostile Tonking and Annam under 
the Viet Minh government, communist controlled but 



14 



having wide support. Cambodia and Laos had anti- 
French governments, which were later placated by 
giving them a higher degree of autonomy. Cochinchina 
was disturbed by an underground government of the 
Viet Minh which engaged in guerilla warfare and which 
created political instability. 

In 1946 the French government recognized the Viet- 
nam state and granted it wide powers within the French 
Union. The question whether Cochinchina was to be 
a part of the new state was to be decided by a refer- 
endum. 

A large number of conferences were held from 1946 
until 1949, when the French finally conceded Cochin- 
china to Vietnam. Most of the difficulties were over 
the degree of independence that Vietnam should be 
granted. The French were anxious to maintain the new 
state within the Union, and Vietnam would have nothing 
less than absolute independence with "collaboration" 
with France on certain economic matters. To France the 
total loss of Indo-China meant the beginning of the dis- 
solution of the French Empire; they feared for the future 
of Madagascar and North Africa. 

The war that is now raging in Indo-China broke out 
in December 1946, when Ho Chi Minh's forces attacked 
the French garrisons in Tonking. Since then the north 
of Vietnam has become a major battleground on which, 
by the end of 1951, more than 30,000 Frenchmen had 
lost their lives, including some of the best young officer 
material. The war, which has cost the French about 
$1 billion a year, is no nearer an end than it was when 
it broke out. Despite U. S. military aid valued at several 
hundred million dollars, the guerilla warfare of infil- 
tration, sabotage, and ruthlessness goes on. The Viet 
Minh forces are said to receive aid from Communist 
China. 

Some measure of political stability has been reestab- 
lished in the parts of Vietnam not held by the com- 
munists after the French established as Chief of State 
of Vietnam, Bao Dai, the former Emperor of Annam. 
However, many of the Vietnamese regard the Bao Dai 
government as a French puppet regime and believe that 
it does not truly represent their desire for national 
independence. Some of the leaders of the Ho Chi Minh 
forces are able to command respect because they repre- 
sent, even to some of the non-communist elements the 
true fighters for Vietnamese independence. 

The communist victory in China has increased the 
importance of the Indo-Chinese war to the free world. 
It is no longer a French Colonial problem; large scale 
aid of the Chinese communists will make a victory for 
the Viet Minh forces a victory for communism in South- 
east Asia. 



HISTORICAL OUTLINE OF INDONESIA 

The Background 

Take an area the size of the United States; flood three 
quarters of it, leaving several large islands and thousands 
of small ones, and place about 80 million people on the 
islands: there you have a replica of the Bepublic of 
Indonesia. 

The more than 3,000 islands, of which Java, Sumatra, 
Borneo, and Celebes are the largest, are inhabited with 
many different peoples, and are overlaid with several 
cultures. The most important of the races are the 
Achinese, Bataks and Menangkabaus on Sumatra, the 
Javanese and Sundanese on Java, the Madurese on 
Madura, the well known Balinese on Bali, the Sasaks 
in Lombok, the Menadonese on Celebes, the more 
primitive Dayaks on Borneo, and Papuas on New Guinea. 
The languages are as varied, with 25 main languages 
spoken through the archipelago. Sundanese, Javanese, 
and Madurese are the most important local languages, but 
increasingly Malay (now called the Indonesian language ) 
is generally understood and is now the official language 
of the Bepublic. 

The cultural orientation of Indonesia is not as complex 
as the above may make one believe. Indonesia is a 
Moslem state, which gives religious freedom to its sub- 
jects, and. there are about 2.5 million Christians and more 
than a million and a half Brahmins (mainly on the island 
of Bali) in addition to a number of Buddhists; in 
some of the more remote regions there are heathen tribes. 

Since 1950 (December 28, 1949 to be exact) the 
Republic of Indonesia is a sovereign independent state 
"cooperating with the Kingdom of the Netherlands on 
a voluntary and equal basis under the provisions of the 
Statute of the Netherlands Union". The Dutch crown is 
recognized as the common link between the Netherlands 
and the fledgling nation. It is a headstrong fledgling and 
the cooperation between the former mother country and 
her precocious youngster is largely non-existent. 

Indonesia has the potential for democracy, and it has 
the potential for economic health and economic growth. 
Her resources, many of them still dormant, are large; 
but there are dangers and pitfalls. The cry of "Merdeka", 
of freedom, is still so fresh in the minds of the people 
that the enormous responsibilities of nationhood and of 
citizenship are not yet understood. At a crucial stage in 
the development of a young nation it is being beset by 
the insidious infiltration of communism. When even 
politically mature nations are having qualms over making 
decisions which may save or destroy western civilization, 
the young republic, during World War II ruled by a 
cruel oppressor, has to choose sides. Indonesia has all 
the resources, human and material, pointing toward a 
bright future, but there are dark clouds on the horizon. 



15 



Communism is not as grave a problem in Indonesia 
as in some other countries; the largely agrarian popula- 
tion resists the radical tenets of communism. In the grow- 
ing industrial labor groups, however, communism is 
somewhat stronger and contributes to the labor unrest. 
Pilfering is widespread, the import and export trade of 
Indonesia affording a rich prize. The major industrial 
unions are communist dominated; recently the fight 
against internal communism, however, has been pursued 
more energetically. 

Although there was communist influence among the 
nationalist groups, and some of them were said to be 
tied to the Comintern in the 1920's, the major danger 
from communism in Indonesia today does not come from 
the indigenous population but from the Chinese minority. 
The recognition of Communist China has brought a large 
contingent of "diplomatic" personnel from Red China, 
and this is said to be the center of subversive propaganda 
against the government. To the extent that the security 
of the country is endangered by the banditry and law- 
lessness which has not yet greatly abated, these groups 
create the breeding ground of economic chaos and 
false political doctrines. It prevents a really effective 
campaign against communism by contributing to the 
insecurity of a young and inexperienced government. 

A nation does not outgrow more than 300 years of 
colonial rule overnight. It takes time and education to 
endow a large, heterogeneous population with the princi- 
ples of political democracy. What were the major events 
that made Indonesia cast off the yoke of foreign rule? 

The Early Days 

The mixture of old Hindu culture and Moslem tradition 
has almost become a traceless indigenous culture. In the 
beginning of the Christian era, the islands of the archi- 
pelago were ruled as a number of separate kingdoms by 
Indian Hindu invaders. A later Moslem invasion (during 
the fifteenth century) converted all of the archipelago 
with the exception of Bali (and some of the tribes) to 
Islam. 

The East Indies, as the archipelago was called, entered 
the world flow of commerce during the sixteenth century 
when Portuguese traders established contact. The goods 
entering the trade of the world were more precious than 
gold. The spice trade, centering around the East Indies, 
was extremely lucrative. The Portuguese traders gave way 
to the British, who in turn were replaced by the Dutch. 
In a short period of time the Dutch traders gained almost 
a monopoly in the spice trade and controlled a large share 
of the Far Eastern trade until the British made Singapore 
her Far East center of trade. 

For two centuries the Netherlands' Indies were ruled 
(and conquered) by the Dutch East India Company. 
With the dissolution of the company at the end of the 
eighteenth century the Netherlands government took 



over control of the Indies. For the Dutch the possession of 
the rich East Indies has been a large factor in the devel- 
opment of the Netherlands as a world trading nation. 
Until about 1870, the colonization of the Netherlands 
Indies was pursued largely for the profit of the Dutch 
treasury, as earlier the profits had accrued to the com- 
pany. Large tracts of land were put at the disposal of the 
government and under the supervision of colonial officials 
the Indonesians had to devote a certain number of days 
to the cultivation of crops for exports, thus contributing 
their part time labor. Vastly profitable, this system led to 
abuses which called for reforms that were instituted 
through the passage of an Agrarian Law in 1870. Greater 
private enterprise took the place of governmental exploi- 
tation, and the road was cleared for a gradual improve- 
ment in the standard of living of the indigenous popula- 
tion. Moreover, the government, after having surrendered 
its policy of outright exploitation, became more interested 
in protecting the population; strict but fair government 
became the rule; health services were organized, and the 
Netherlands soon gained the reputation of a model 
colonial power. 

The Growth of Nationalism 

Although under recent Dutch rule the East Indies made 
great strides in economic development, and the popula- 
tion of the islands increased rapidly, the Dutch rigorously 
squelched the growth of any strong nationalist sentiments. 
As early as 1908 a group of intellectuals had founded a 
nationalist group on the island of Java. First interested 
mainly in topics of cultural, economic and social nature, 
the group soon spread its interest into the political field. 
This society never gained importance, however, perhaps 
because it soon was paralleled by a new society which 
appealed to the Moslem base of Indonesian culture. Al- 
though resolutions were made to foster the development 
of self-government within the Dutch empire, the group 
lost its appeal when it split into a radical and a conserva- 
tive branch. 

During the twenties, Indonesia saw the development 
of a nationalistic party, dedicated to non-cooperation with 
the Dutch and to the use of revolutionary means to 
achieve its end. The leader of the Partai Nasional Indo- 
nesia was Sukarno, the present President of the Republic 
of Indonesia. 

As the political strength of this party rose, it was dis- 
solved by the Netherlands government, and Sukarno was 
interned. He was not freed until the Japanese had invaded 
the Netherlands Indies and fostered the development of 
Indonesian nationalism for their own purposes. 

At the outbreak of the Second World War, nationalism 
in Indonesia was still immature. Mainly concentrated on 
Sumatra and Java, the rest of the archipelago was hardly 
touched by the sentiments for independence. Although a 
number of different parties and groups developed, they 



16 



never showed much strength. They were split up and 
divided; they worked at cross purposes and having largely 
worked underground lacked coordination and drive. 

The reaction of the Netherlands to the growth of nation- 
alist sentiments in Indonesia was one of gradual realiza- 
tion that ultimate self-government was inevitable, and 
the government's policy foresaw a slow growth toward 
greater responsibilities in political matters. 

Self-government 

As early as 1916 a legislative council (the Volksraat) 
was established by the Netherlands government, and it 
met for the first time in 1918. This body, composed of 
partly nominated and partly elected members (24 of 
each), had advisory powers with regard to budgetary, 
military, and other local governmental matters in the 
Netherlands Indies. Its composition was partly on a racial 
basis, with 30 Dutchmen, 25 Indonesians of various prov- 
inces, and five members of other races such as the Chinese 
and Indians. In 1922 its powers were increased from 
merely advisory to actual legislative powers, always sub- 
ject to the veto of the Crown, and of the High Com- 
missioner. 

Although the powers of the Volksraat gradually grew, 
the election of its membership was not truly democratic, 
and to a large degree the Dutch still relied on the local 
governments of the ruling potentates in the outlying dis- 
tricts of the Indies. 

The desire for ultimate independence, however, was 
not restricted to the small, ineffectual parties; in 1937 the 
Volksraat unanimously petitioned the Dutch government 
to grant Dominion status to the Netherlands Indies within 
10 years. 

The War Years 

The swiftly accomplished occupation of the Nether- 
lands Indies by the Japanese resulted in the imprisonment 
or internment of all Dutch and other European nationals. 
It was official Japanese policy to eradicate Netherlands 
influence in Indonesia, and to obliterate any traces of 
European rule. On the one hand, the nationalist leaders 
in Indonesia wanted to cooperate with the Japanese, hop- 
ing to further the ends of independence, on the other 
hand, they realized that they had exchanged one foreign 
master for another. The nationalist groups split up, some 
■of them cooperating with the Japanese even after they 
had nothing to gain by cooperation, the other group going 
underground and organizing resistance groups. 

Originally, the Japanese did not find much opposition 
in Indonesia. They were Asians, and they used those 
nationalist leaders who cooperated with them to aid their 
own propaganda purposes. As the Japanese lost hope for 
ultimate victory, they attempted to win greater support 
from the Indonesians by promising them a larger share in 



the affairs of their country. They actively encouraged 
Indonesia's independence. 

The nationalists who had cooperated with the Japanese, 
led by Sukarno and Hatta, and representing the islands of 
Java, Madura, and Sumatra, went so far as to proclaim the 
desire to range the Indonesians on the side of Japan 
against the Allies. The defeat of the Japanese and the 
Indonesian declaration of independence under Japanese 
auspices were almost simultaneous. 

After a number of conferences with the Japanese com- 
manders Hatta and Sukarno proclaimed the independence 
of the Republic of Indonesia, in the name of the Indo- 
nesian people on August 17, 1945. Not until five days later 
was it officially announced by the Japanese commanders 
in Indonesia that Japan had surrendered on the 15th. 

Postwar Developments 

The Dutch suspect that the support for the early dec- 
laration of independence and the later surrender of 
Japanese weapons to the Indonesians rather than to the 
Allies, were deliberate moves on the part of the Japanese. 
Without a doubt, these two moves contributed greatly to 
the outbreak of the Dutch-Indonesian conflict after the 
war. 

The declaration of independence for Sumatra, Madura, 
and Java did not immediately receive the full support of 
all its people, particularly not of the police and pre-war 
administrative officials. However, the de facto recognition 
of the new Indonesian "government" set up as speedily as 
possible, by the British troops assigned to accept the 
surrender of the Japanese, swayed popular sentiment 
toward the new republic. The British forces were under 
strength and ill prepared to take over the large task of 
protecting the former interned Europeans and also dis- 
arm the Japanese troops remaining on the Islands. With- 
out the cooperation of the Indonesians it would have been 
an impossible assignment. Though doubtless a necessary 
step, the Dutch were displeased with it, and claimed that 
it strengthened the hand of an irresponsible government. 
In other areas of Indonesia, Netherlands' control was re- 
established without major trouble. 

The Dutch were prepared to turn over increasing re- 
sponsibility to the Indonesians, as was announced by the 
Dutch Crown in 1942. The Netherlands Overseas Terri- 
tories were to stand on a basis of constitutional equality 
with the mother country but the exact organization of 
Indonesia was not defined. 

In 1946 definite proposals were made by the Dutch, 
suggesting the establishment of a Commonwealth of In- 
donesia (consisting of the several parts of Indonesia with 
varying degrees of self-government) with important 
powers of government given to its own democratically 
elected body but with a few reserved powers for a repre- 
sentative of the Crown as the head of the government. 
Indonesia would thus have a federal structure. The Dutch 



17 



suggestion for a federal form of government for Indonesia 
stemmed from the fact that under such a government the 
Republic of Indonesia, with its large population, could 
not dominate those other groups of the archipelago which 
were not part of the Republic. 

Partial Agreement. 

In November 1946 the negotiations between the Dutch 
and the leaders of the Republic of Indonesia led to the 
Linggadjati Agreement in which the de facto authority of 
the Republic was recognized over the islands of Java and 
Madura, and of Sumatra only insofar as the Netherlands 
troops were not in control of areas. The agreement also 
provided for the creation of a Union under the Crown in 
which the mother country and the future United States of 
Indonesia (of which the Republic would be one part) 
would be co-equal partners. 

Following acceptance of this agreement, but before it 
was officially ratified, the islands to the east of Borneo and 
Java formed an autonomous state, the so called "Great 
East". This was to be part of the United States of Indo- 
nesia. On Borneo several smaller states were organized. 

The emergence of a federal state led to splintering of 
some of the territories of the Republic, believing that in 
separate statehood under the Union their identity could 
be better preserved. It was not until 1948 that a pro- 
visional Federal government was organized in the capital 
city, Batavia, now named Djakarta. 

In the meantime, however, the Dutch, maintaining that 
the Republic was not living up to the Linggadjati Agree- 
ment, began to occupy some of the territories of the Re- 
public, particularly on Java and Sumatra. The war that 
ensued did not stop until the end of 1949 when all sover- 
eignty was transferred to the Republic of the United 
States of Indonesia. 

The reasons for the outbreak of the war are many and 
varied. Most important was the fact there never was any 
real meeting of the minds on the various agreements 
made between the Dutch and the leaders of the Republic 
of Indonesia, who believed they rightfully represented the 
desires of all Indonesia. The Indonesians felt that some of 
the declarations of principle in the agreements were de 
facto recognition rather than statements of plans for fu- 
ture action. The Dutch, on the other hand felt that they 
were not dealing with an equal partner but merely with 
the future leader of the U. S. of Indonesia; at the time of 
negotiating, they were not juridically recognized. An- 
other factor is that the Republic was aided by a great deal 
of popular sentiment in their favor, throughout the world. 
If the Indonesians meant what they said, they wanted 
outright recognition and independence first, after which 
they would voluntarily join in a Union with the former 
mother country. 



The Dutch and Indonesia 

The relationship between the Republic of the United 
States of Indonesia and the Netherlands was laid down 
in the Statute of the Union, which gave Indonesia com- 
plete and unconditional sovereignty. There was one terri- 
torial dispute, however that has remained unresolved 
until this day. Western New Guinea remained Dutch 
territory. Although the Indonesians laid claim to it as 
part of their domain, they never controlled it, and its 
future under the Statute of the Union was to be settled by 
peaceful negotiation between Indonesia and the Nether- 
lands. The date, December 1950, by which the negotia- 
tions were to have been concluded has passed but no 
agreement has been reached. 

Perfunctory negotiations are taking place in the Nether- 
lands, concerning the future of West Irian, as the Indo- 
nesians call western New Guinea. The Indonesians, when 
referring to this area, talk about the "violation of Indo- 
nesian sovereignty" although they have never exercised it, 
and the Dutch have never relaxed their control of this 
remnant of a great empire. 

The Indonesians, proud of their newly won sovereignty, 
are chafing under the Statute of the Union. To them the 
association with the Netherlands through the Crown is too 
much a reminder of former colonialism. Indonesia has 
proposed the replacement of the statute by a treaty. The 
commonwealth, so greatly hoped for by the Dutch, with 
profitable trade and close economic relations, seems al- 
most stillborn. 

The federal structure of Indonesia was not of long dura- 
tion. Organized under a provisional constitution, it was 
soon attacked as a Dutch creation of puppet states, and in 
1950 it was replaced by another provisional constitution 
making Indonesia a unitary state. A large part of the 
sacrifice to preserve the identity of some of the island 
cultures by restricting the political power of the Javanese 
majority has been in vain. Only the future will tell 
whether the new constitution will contribute to the 
growth of democratic institutions in Indonesia. 



ECONOMIC TIES 

In times past the focus of the entire economic life of 
the nations of Southeast Asia has been directed toward 
two goals: self-preservation and the production of raw 
materials. In many parts of the region the productivity of 
farm labor has been so low that one man produced little 
more than enough for himself and his family. It has been 
estimated that the average food production in the Far 
East only exceeds by thirty percent the amount needed to 
feed the producer. The direct consequence of this low 
productivity has been that any substantial migration of 
labor to non-farm pursuits has resulted in lower agricul- 



18 






tural production. If this non-farm labor was engaged in 
the production of commodities which entered into world- 
trade channels, some of these exports would have to pay 
for the importation of an amount of foodstuffs equivalent 
to that originally produced by the former farmer. 

Although a large variety of raw materials, both agricul- 
tural and mineral, are produced in Southeast Asia, the 
economy of the region is most intimately tied to the pro- 
duction of rice, rubber and tin. These commodities, enter- 
ing world markets in large amounts, determine the earn- 
ing capacity of the Southeast Asian nations. By no means 
all of the foreign exchange earned by the sale of raw 
materials is available for the beneficial use of the coun- 
tries producing these raw materials: much of the produc- 
tive capacity, beyond the subsistence level, has been 
financed and is still owned by the nations which have con- 
trolled the countries of Southeast Asia. 

Great Britain, France, and the Netherlands, have a vital 
financial stake in Southeast Asia. Their interest lies not 
only in the procurement of raw materials but also in 
earnings from the investments made in the area during 
the period of colonialism. Commodities sold on world 
markets for dollars which Southeast Asia could spend in 
( or remit in profits to ) Western Europe, provided Europe 
with dollar exchange to finance imports from the United 
States. This form of triangular trade was one of the most 
important factors in the relative stability of the world 
money market in pre-war times. Not only were the colo- 
nies dollar earners but they were also important markets 
for the industries of Western Europe. The increasing 
feeling of nationalism and the successful drives toward 
political independence of the nations of Southeast Asia 
has greatly reduced this triangular trade. 

It has been estimated that in the pre-war period 18% of 
the national income of the Netherlands was derived from 
her East Indies. Comparable recent figures are not avail- 
able, but the loss of Indonesia has been a heavy financial 
blow to the Netherlands. Although commercial and finan- 
cial relations between Indonesia and the former Western 
European mother country are still close, there is increas- 
ing evidence that Indonesia is trying to rid herself of her 
ties to the Netherlands. 

French Indo-China's trade in the pre-war period was 
dominantly orientated toward France which she supplied 
with raw materials of many kinds. Although the French 
grip on the economy of Indo-China has by no means been 
broken, it will undoubtedly continue to weaken. During 
the period of the present war in Vietnam the economies 
of the Associated States of Indo-China are supported 
largely by the defense expenditures of the French Gov- 
ernment, which is spending about $1 billion annually for 
the defense of her partners in the French Union. 



The only country of Southeast Asia which still remains 
in true colonial status is the Federation of Malaya. Great 
Britain, which in the past has shown fairly enlightened 
colonial policies leading toward the ultimate self-govern- 
ment of most of her territories, has been somewhat reluc- 
tant to speed such a process for Malaya. The reason is 
simple: the Malay Federation has in the recent past been 
the greatest net dollar earner in the entire British Com- 
monwealth. Most of the dollars earned by the exports of 
Malayan rubber and tin have been surrendered to the 
Sterling Area dollar pool in London, and only the most 
necessary imports into the Malay Federation have been 
permitted to be paid for with dollars. 

Doubtless much of the Southeast Asian policy of the 
colonial powers has been dictated not by a lack of insight 
into the tremendous drive for independence but a desire 
to make sure that the emerging independent states of 
Southeast Asia will not cast aside their commercial and 
financial ties with Western Europe. It is one thing for the 
European powers to realize the inevitability of emerging 
sovereignty in Southeast Asia; it is another to allow the 
extremely profitable and often essential commercial and 
financial ties with these nations to break completely. 
Another important factor is the knowledge that the eco- 
nomic development of these countries will not only re- 
quire funds but will also provide markets for the goods of 
Western Europe. Although the colonial nations differ in 
their method, their one goal is to provide for the growth 
of Southeast Asian independence within the framework of 
a union with the mother country. 

It is questionable whether this goal can be achieved. 
Great Britain, formerly successful in holding the Com- 
monwealth together, has failed to keep Burma in the 
British Empire; the status of Indo T China in the French 
Union is most tenuous; in all essential aspects the Nether- 
lands Union is a paper scheme. In the eyes of the in- 
digenous population, the motives of Western European 
interest in the countries of Southeast Asia are suspect for 
several reasons; in the first place, the colonial powers, 
while often promising the eventual independence of the 
colonies, have been hesitant, at best, in implementing the 
measures required to prepare the people for independ- 
ence. Secondly, during the present period of world ten- 
sion the interest in the military defensibility of the area 
is interpreted as primarily a selfish interest on the part of 
the Western powers rather than an altruistic attempt to 
foster the development of freedom and a higher standard 
of living for the teeming masses of the Asian subconti- 
nent. Communist propaganda has been able to exploit 
these suspicions, and the policy of the free world should 
recognize that communist support of the drives toward 
independence of the nations of Southeast Asia is re- 
garded, by them, as genuine help. 



THE PATTERN OF TRADE 

Domestic 

In studying the economic structures of the countries 
of Southeast Asia, one of the main facts which must be 
kept in mind is that the greater part of the indigenous 
population, engaged in agrarian pursuits, is not used 
to a money economy. The main satisfaction of wants is 
derived from the soil. The growing of foodstuffs, often 
just above the subsistence level, is the main contribu- 
tion by the larger part of the population to the economy 
of the country. Although commercial crops of rice and 
other cereals, rubber, lac, and other commodities are 
grown, a large part of the population engages in agri- 
culture for its own subsistence only. Any surplus is 
used to reduce the debt owed the moneylender or to 
barter for simple consumer goods. The use of surplus 
crops for general sale and the satisfaction of demand 
through the use of money and a "free market" is by no 
means a universal practice. The limited amount of actual 
trade that takes place in the hinterland of the Southeast 
Asian nations is not an integral part of the communal 
life, but rather a series of individual transactions between 
members of small groups. Over most of Southeast Asia 
the Chinese minorities have invaded the field of trade and 
commerce and, often being more ept at trading than the 
natives, have acquired a special status in these countries. 

Although the Chinese, an important minority in all 
of the countries of Southeast Asia, have supplied the 
labor for a number of mining industries and the rubber 
estates, in many instances the Chinese immigrant has 
found the field of retail trade to be more lucrative than 
agriculture. He was interested in saving sufficient money 
to send home for the support of his family and to provide 
for his ultimate return to the land of his ancestors. The 
Chinese became the middleman, the trader, the retailer, 
no matter what his occupation might have been in his 
homeland. 

Being thrifty and born traders, the Chinese soon 
became economically powerful enough to enter the bank- 
ing business, the export and import trade, and the ship- 
ping industries. In most of the countries of Southeast 
Asia one finds a number of very wealthy and powerful 
Chinese, strongly entrenched in the economic life of 
the country. Until recently the Chinese favored the 
family type of business and left the joint stock enter- 
prises to Europeans, but this is slowly changing and 
there remain few fields in which the Chinese have not 
made in-roads. 

Thus one finds that in the countries of Southeast Asia 
which still are, or once were, under the domination of a 
European nation, that certain sectors of the economy 
were largely preempted by the nationals of the colonial 
power or by the Chinese. Even in Thailand, the only 
country never under Western domination, the Chinese 



play an important role in the business world. The native 
populations, if not engaged in agriculture, furnish most 
of the labor for mining and for commercial farming. 

The problems of Chinese minority groups, conse- 
quently, hinge not only on the fact that in general the eth- 
nic Chinese have not assimilated, either racially by inter- 
marriage, or by adopting the nationality of their new 
home in any real sense of "belonging"; they are fre- 
quently resented because of their economic power and 
influence, and it is immaterial that they may have 
achieved their power through ability and thrift in the 
face of ineptitude of the indigenous people in com- 
mercial matters. 

In the countries of Southeast Asia the average annual 
per capita income is estimated as ranging between $30 
to $40. As a large part of the population depends on 
agriculture for a living, the actual cash available for the 
satisfaction of normal wants is extremely small. In addi- 
tion, in many of the agricultural areas, the native farmer 
is continually in debt to the local moneylender who has 
extended funds at high rates of interest for funeral or 
feast and awaits the next harvest to get his due. In many 
cases this agricultural indebtedness has led to absentee 
ownership of the rice fields, and tenant farming. 

Foreign 

The pattern of the external trade of the countries of 
Southeast Asia dealt with in this study reflects rather 
accurately their relationship with the nations of Western 
Europe. This relationship has been treated in the section 
on economic ties. 

It is interesting to compare the stake of each of the 
countries of Southeast Asia in Far Eastern Trade. (See 
table below. ) 

Burma and Thailand are the two countries depending 
most on the Far East as markets for their products and 
sources for their imports. Burma exports 60% of her 
total exports to the Far East and gets 50% of her 
imports from there. This represents only a 10% drop 
from the 1938-9 percentage figures. 

Thailand's dependence on Far Eastern trade is even 
larger than Burma's: about 75% of her total exports are 
to Far Eastern countries, a percentage which has not 
changed significantly since 1938-9. However, in 1938-9 
Thailand procured almost half her imports from the 
area of the Far East, whereas in 1949, the latest year 
for which comparable figures are available, only 33% of 
her imports came from there. 

In the case of Malaya, the participation in Far Eastern 
trade reflects her position as a dollar earner for the 
Sterling Area. Only about one fifth of her exports go 
to Far Eastern countries, while one quarter of her total 
exports goes to the U. S. alone. A large percentage of 
Malayan imports, however, are purchased in the Far 
East, 60% in 1950. In addition to the fact that Malaya 



20 



sells in dollar markets and buys in soft currency areas, 
the figures also reflect the position of Singapore as an 
entrepot port and transshipment center for much of the 
foreign trade of her neighbors. Although 30% and 26% 

Percentage Distribution of Southeast 
Asian Trade with Selected Areas 

Pre-war-Post-war 






(% of total exports or 


imports ) 






Fab East 


Japan 


U.S. 


Burma 

Exports to 

1938-9 


70 
60 

60 
50 


1.9 

17.4 

6.6 

2.2 


0.16 


1950 (6 mo) 


0.08 


Imports from 

1938-9 


3.4 


1950 (6 mo) 


4.6 






Thailand 

Exports to 

1938-9 


78.5 

74 

49 
32.6 


1.3 
6.9 

15 
10.9 


0.26 


1949 


(1950) 26.8 


Imports from 

1938-9 


4.7 


1949 


(1950) 13.2 






Malaya & Singapore 

Exports to 

1938 


16.6 

22.8 

62.5 
61.5 


9.45 
2.9 

2.26 
3.24 


30 


1950 


26.5 


Imports from 

1938 


3.1 


1950 


3.1 






Indo-China 

Exports to 

1938 


25 

24 

27 
6.8 


3 
n.a. 

2.84 
n.a. 


8.8 


1950 


20 


Imports from 

1938 


5 


1950 


5.75 






Indonesia 

Exports to 

1938 


23.8 
36.2 

17.4 

22 


3.1 
1.26 

14.8 
10.1 


13.5 


1950 


16.5 


Imports from 

1938 


12.4 


1950 


21.4 







NOTE: n.a. means not available. 

Compiled from data published in 

"Economic Survey of Asia *id the Far East, 1950" 

United Nations 



of Malayan exports in 1938 and 1950, respectively, went 
to the U. S., only 3% of her imports were procured in the 
U. S. in each of the years given. 

Indo-China exported about one quarter of her total 
exports to the Far East, both in 1938 and in 1950. Her 
imports from the area, however, dropped from 27% of 
the total in 1938 to 7% in 1950. A much larger part of 
Indo-Chinese exports went to the United States in 1950 
than in 1938, the percentages being 20% and 8.8% respec- 
tively. The share of the United States in the total of Indo- 
Chinese imports, however, has not changed significantly, 
being about 5% in 1938 as well as in 1950. 

Indonesia took a more active part in Far Eastern trade 
compared with other areas in 1950 than in 1938. While 
24% of her total exports went to the Far East in 1938, 
in 1950 this percentage was 36%. Compared with 17.4% 
in 1938, in 1950 she bought 22% of her imports from Far 
Eastern countries. Although her exports to the U. S. 
remained relatively static, in relation to the share of the 
U. S. in Indonesian exports, Indonesia procured about one 
fifth of her total imports from the U. S. in 1950, compared 
with only one eighth in 1938. This change reflects the 
greater use which Indonesia has been able to make of her 
dollar earnings, compared to pre-war. 

In regard to the trade between the countries of South- 
east Asia with Japan, there was a significant increase in 
the share of the total exports of Burma and Thailand 
going to Japan, whereas the reverse is true of the Malaya- 
Japanese trade. 

The share of imports into the countries of the area 
supplied by Japan decreased greatly in the post-war 
period compared with 1938. This reflects the drop in 
Japanese exports following her defeat and the almost 
complete collapse of her economy. The rapid recovery 
of Japan during the recent past will probably soon be 
reflected in an increasing share of Japan in the export 
and import trade of the countries of Southeast Asia. 

Should Japan be able to fill the need of Southeast Asia 
for capital goods, and should she shift her purchases of 
raw materials for her industrial machine to Southeast 
Asia, the two-way trade between the countries of South- 
east Asia and Japan may well show a significant rise in 
the future. The increase in the regional Far Eastern trade 
that would result from such a development would con- 
currently increase the regional interdependence. 

NATURAL RESOURCES OF SOUTHEAST ASIA 
General 

The countries of Southeast Asia are rich in resources 
of many kinds, both mineral and agricultural. Due to 
some outstanding deficiencies in coal and iron ore, how- 
ever, the development of a major industrial complex 
does not seem likely in the foreseeable future. Although 
coal and iron ore have been found in Southeast Asia, 



21 



either the quality is not adequate for economic exploita- 
tion under presently known methods, or the majority 
of the known deposits is too minor and scattered to allow 
for speedy development. Except for some hard coal 
deposits of major proportions in Indo-China, most of the 
coal deposits are ligneous or bituminous and thus un- 
suitable for making steel. 

Southeast Asia's requirements for machinery will be 
largely dependent on the present centers of heavy in- 
dustry for the foreseeable future. There is valid doubt 
of the feasibility of establishing indigenous iron and steel 
production of important size. However, there should be 
room for light industries to satisfy the needs of the 
people of Southeast Asia for consumer goods. In the 
immediate future the production and processing of raw 
materials and agricultural products seems to be a more 
economic way for the countries of Southeast Asia to 
continue the development of their domestic economies. 

One of the major problems, as has been indicated in 
an earlier part of this study, is the present relatively low 
level of agricultural production. Small land holdings, in- 
tensively worked, need maximum amounts of labor. 
Until land holdings can be enlarged, agricultural pro- 
duction modernized, and the farm productivity per man 
and yield per acre greatly increased, available labor 
will be needed on the farm rather than in the factory. 

The following sections will outline the natural re- 
sources of each of the countries treated in this study. 
Each of the country sections will be broken down to 
show agricultural, mineral, and hydro-electric resources. 

It should be pointed out here that in regard to mineral 
and hydro-electric resources, the knowledge about the 
geophysical characteristics of each of the countries is 
quite limited. In almost all of the countries geologic 
exploration is just in its infancy. Geologic surveys must 
be preceded by mapping, and even in this respect, the 
countries of Southeast Asia are deficient. Much of the 
estimates of mineral resources are based on quite incom- 
plete and spotty explorations, and all of the material 
dealing with this subject must be considered with this 
in mind. 

During the post-war period most of the countries of 
Southeast Asia have made great efforts to explore and 
develop their resources. The future may show some great 
and important changes in the economic prospects of 
some of the areas. 

With nationalistic fervor common to countries that 
have recently won their independence, most of the South- 
east Asian nations rely on government planning and 
control over economic development. 

Living under constitutions incorporating certain social- 
ist principles, the Southeast Asian knows little about 
U. S. private enterprise and the operation of the free 
market. In addition, the low economic development of 
the countries has prevented the accumulation of sub- 



stantial domestic savings and the necessary capital for 
larger investments can therefore only be obtained from 
abroad. Fear of renewed economic domination or ex- 
ploitation by a foreign power presents an obstacle to 
generous treatment of foreign capital. 

The development of the economies of the nations of 
Southeast Asia could be severely restricted by national- 
istic or socialistic economic policies. In addition, the 
political instability of the area will present another 
obstacle to the availability of foreign capital resources 
and private know-how. 

In regard to power development, the countries of 
Southeast Asia have been very anxious to restore and 
improve the electric generating facilities which suffered 
severely during the Japanese occupation and the war. 
Whether through under-maintenance or actual damage, 
the early post-war period was characterized by an acute 
shortage of power. Although the countries are fairly 
rich in potential water power, little actual development 
of the hydro-electric power generation has taken place. 
During the years prior to the war, most of the electric 
power development was in private hands and the needs 
for electricity had been met by thermal plants, using 
coal or oil and occasionally diesel engines. Many of the 
actual generating plants were the private property of 
industries which consumed all their own electric power. 

The exploitation of hydro-electric resources requires 
amounts of capital and technical experience beyond the 
means of local private companies. Steam generators 
were cheaper and assured a quicker return on the invest- 
ment. This led to planning of hydro-electric power de- 
velopment based on state ownership, despite the fact 
that the governments have neither the funds nor the 
technical experience to execute the plans. 

Little accurate data are available on the potential 
hydro-electric resources of the Southeast Asian countries. 
The following figures represent available estimates of the 
waterpower reserves of the five countries, in potential 
firm power (millions of kwh per year). 

Country Potential annual yield 

Burma 72,000 

Fed. Malaya 8,000 

Indo-China 36,000 

Indonesia 26,000 

Thailand 24,000 

At present, none of the countries use more than 2% of 
this water power, most of them considerably less. 

BURMA 
Agriculture 

Burma lives on a rice economy. The climate of the 
areas of the Irrawaddy River and Lower Burma is such 



22 



that the necessary water for the growing of paddy rice 
is assured in abundance. Although an indigenous crop, 
under British rule the growing of rice was promoted 
until Burma became the world's largest rice exporter. 
During the thirties, Burma exported more than 3 million 
metric tons a year. The problem of absentee landowner- 
ship has been indicated in the historical outline on 
Burma. The depression in the rice producing areas of 
Burma during the Japanese occupation when no rice 
exports took place was lightened only by the fact that 
the money lenders, and British law upholding their land 
titles, left the country. The strength of absentee land- 
ownership was broken, and the Burmese decided never to 
let it regain its grip. However, the legal tangles resulting 
from the claims of the Indian money lenders are one of 
the most pressing problems in Burmese-Indian relations. 

As about two-thirds of the cultivated land of Burma 
is planted to rice, the other agricultural products are not 
of major importance. Except for teakwood and cotton, 
and a number of vegetable oils and nuts, agricultural 
products do not loom large in Burma's external trade. 
Rubber is grown in Burma but production is not sub- 
stantial, amounting to about 10,000 metric tons in 1950. 

The major agricultural problem in Burma is still the 
rehabilitation of rice production. Two million acres of 
rice land must again be brought under cultivation, irriga- 
tion systems must be repaired, and the supply of draft 
animals must be replenished. All these programs must 
be fulfilled before Burma can return to its status as the 
world's most important surplus-producer of rice. The 
accomplishment of these tasks, however, will not be 
possible until political stability is achieved. 

Minerals 

The mineral resources of Burma are varied and quite 
extensive. Prior to World War II Burma was the second 
largest producer of tungsten, in 1939 producing 5,000 
tons, but postwar recovery has been very slow. Also a 
producer of copper, lead and zinc with considerable 
reserves of fairly rich minerals, Burma's production has 
not returned to pre-war levels but has remained a mere 
trickle. Although the tin mines had not suffered exten- 
sive damage during the war, and therefore production 
on a substantial scale was easily resumed, in 1949 and 
1950 the political disturbances within the country re- 
duced production, and 1950 production was only 1,710 
tons of tin, about J^ of the prewar average. 

The resources of coal, generally minor in all of South- 
east Asia, are not important for Burma. Although found 
in about 10 districts, only two or three of them are of 
commercial importance. Despite the trend, in all the 
countries of Southeast Asia, toward indigenous coal 
production, there has been no production in Burma. The 
government has undertaken steps, however, to exploit 
the two best deposits. 



Inadequate topographic mapping and exploration does 
not allow accurate estimates of the iron ore resources 
of Burma. Although numerous deposits have been founi 
the exact extent of the reserves is not known, and only 
the deposits in the Northern Shan States have been 
worked in the past, mainly to provide a flux for lead 
smelting operations. 

In all of Southeast Asia, the postwar period has been 
characterized by a diligent search for petroleum. Al- 
though the production of oil in the area has been rising 
steadily, Burmese production has only recovered slightly, 
amounting to 316,000 barrels in 1949 compared with a 
1936-41 average of more than 7.5 million barrels. 

Oil production in Burma has recently been handled by 
the corporate efforts of three companies: the Burmah 
Oil Company, owning 76.8%, the Indo-Burma Petroleum, 
owning 17%, and British Burma, owning 6.2%. Under the 
program of nationalization, provided for in the Burmese 
constitution, the Burmese Government has been negotiat- 
ing with the British Government for a loan for £5-7 
million to acquire a 30% interest. This represents a soften- 
ing of official policy which originally foresaw taking 
over oil production completely, and an agreement has 
been reached for the one-third ownership and a corre- 
sponding share in the profits. 

Far from being a net exporter, as it was before the war, 
Burma produces only about 40% of her own requirements, 
importing the rest from Borneo, the Near East, Indonesia, 
and Sumatra. The major oil fields in Burma are presently 
not being worked, due to the civil disturbances. 

As of January 1, 1950, Burmese oil reserves were esti- 
mated at 50 million barrels, or 0.06% of world resources. 

Hydro-electric power 

In Burma, as in all the countries of Southeast Asia, both 
the total and the per capita production of electric power 
is insignificant compared with the production in the more 
highly developed countries of the world. For example, 
the per capita production of electric power from all 
sources (coal, oil, and water power) was as follows: 

United States (1947) 1775 kwh 

Canada (1947) 3580 

United Kingdom (1947) 855 

Burma (1949) 5.3 

Indonesia (1949) 5.2 

Malaya not available 

Thailand ...(1949) 3.0 

Singapore (1949) 176 

In Burma only 35% of the power generated is derived 
from hydro-electric power plants, the rest being gener- 
ated from thermal plants, using oil or coal, and a small 
amount from diesels. 

Of the total 36,800 kw installed capacity in Burma in 
1949, much was owned privately by industries which had 

23 



their own power-generating facilities. Since the power 
statistics on Southeast Asian countries do not always 
break down the figures to show the privately generated 
and publicly generated power, an accurate picture is diffi- 
cult to draw. 

It may be stated, however, that in prewar days, most of 
the generating capacity had been developed by private 
enterprise; this private ownership even extended to hy- 
dro-electric power, of which 96.9% was privately owned 
before the war. However, the increasing need for power 
development, the greater capital outlay required, and the 
political instability in most of the nations is closing this 
field for private enterprise and the development of hydro- 
electric power is becoming increasingly a governmental 
function. In most cases, however, the respective govern- 
ments have neither the funds nor the know-how to further 
this development, and the need for outside assistance, 
both financial and technical, will be substantial. 

In Rangoon and most of the other larger cities, the 
electric generating capacity has recovered from the dam- 
age of the war years. In most of the country, however, the 
facilities are not back to prewar standards. Due to the 
civil strife, demand, particularly by industry, is not as 
large as prewar, hence any really acute power shortage 
has been averted. 



THAILAND 



Agriculture 



As was true of Burma and Indo-China, Thailand has for 
many years been a net exporter of rice, the food staple of 
Southeast Asia. Unlike Burma, Thailand has surpassed 
her pre-war exports of rice, this staple constituting 40 to 
50% of the value of all Thai exports. Pre-war Thailand 
had about 95% of her cultivated acreage planted to rice, 
and this commodity, together with rubber, tin and teak, 
make up almost the total of Thai exports. The rice exports 
are handled by the government which derives a sub- 
stantial amount of revenue from it. 

The development programs of Thailand, similar to the 
programs of the other countries of Southeast Asia, involve 
diversification of agricultural production without decreas- 
ing the harvest of rice. The nations want to free them- 
selves from excessive dependence on the cultivation of 
rice. 

A large part of the land area (60-70%) of Thailand is 
covered with forests yielding teak, an important export 
commodity. About 45% of the teak concessions are in 
British hands, while about 40% is exploited by the local 
governments. A small percentage ( 15%) is retained by the 
local owners. 

A commodity of increasing importance in Thai exports 
since prewar days is rubber, of -which 112,000 metric tons 
were produced in 1950. Although expected to increase by 



in 1951, Thai rubber production was approximately 
the same in 1951 as in 1950. 

Minerals 

Although Thailand is a land rich in mineral resources, 
commercial exploitation of these has largely been re- 
stricted to tin and tungsten. Others found in Thailand are 
antimony, coal, copper, lead, zinc, manganese, molyb- 
denum, silver, and some precious stones. Small iron ore 
operations, and some mining of lead and antimony, are 
also taking place. 

Thai tin production is not comparable to the Malayan 
production, the 10,530 metric tons produced in 1950 being 
only 66% of the 1938 production, whereas Malaya had in- 
creased her tin production in 1950 to 130% of the 1938 
total. Thai production has lately- been recovering rapidly; 
it was fostered by the government which allowed the tin 
producers to retain 60% of their foreign exchange earnings 
as a stimulus to expanded production. 60% of Thai tin 
comes from dredging operations largely owned by British 
and Australian interests. 

The future economic development of Thailand will 
probably not include steel mills, since iron ore deposits 
are not one of Thailand's assets. Although a number of 
outcroppings have been found, most of them are presently 
of no commercial value; however, more thorough geologic 
exploration may divulge better iron resources. In one dis- 
trict in which detailed exploration has been undertaken 
the deposit is said to contain in the neighborhood of 1.5 
million tons. Production in commercial quantities has not 
taken place, aside from one 25 ton per day operation for 
the production of pig iron using charcoal. 

Thailand is a fairly important producer of tungsten, but 
past production has varied greatly. The peak production 
years during the war showed Thailand producing between 
1,000 and 2,000 tons annually. The post-war slump, with 
200 tons of tungsten production in 1946, has been in- 
creased to a 1,000 ton annual production in 1950. The 
Thai government has recently announced that it had 
decided to nationalize the tungsten industry after the 
present concessions expire. According to the Thai gov- 
ernment announcement, under the management of the 
Thai Department of Mines production is expected to 
increase. 

Thailand's position in regard to coal is not much better, 
the five known deposits of fair size consisting largely of 
lignite. No coal is presently being mined. 

Together with the other countries of Southeast Asia, 
Thailand has increased its search for oil. Deposits of a 
size sufficient for exploitation are said to have been found 
in the south of the country. According to some reports 
oil drilling equipment has been ordered from abroad. 



24 









Hydro-electric power 

The installed electric generating capacity of Thailand 
is the smallest of the countries in the area covered by this 
report, amounting, in 1949, to an estimated 30 thousand 
kw. Although 1950 showed an increase in the power gen- 
erated, the amount being 156% of 1938, there still existed 
a critical shortage which will not be relieved until several 
hydro-electric projects have been completed. A loan for 
this purpose has been extended by the International Bank 
for Reconstruction and Development, and some thermal 
power generators, to alleviate the shortage on a short 
term basis for the city of Bangkok, have already been 
ordered. 

The planned hydro-electric plant, a five year project 
calling for the installation of 14,400 kw, requires an ex- 
tensive dam, and is designed to supply power mainly for 
the city of Bangkok. 

MALAYA 
Agriculture 

The agricultural economy of the Federation of Malaya 
is based on rice and rubber. The rice production, not 
sufficient for domestic consumption, is supplemented by 
imports, generally from Burma or Thailand. Rubber, the 
mainstay of Malay economy, is grown on estates and on 
small holdings. In 1949 just over 400,000 tons of rubber 
were produced on estates (covering 1.9 million acres) and 
slightly more than 270,000 tons derived from small hold- 
ings (1.4 million acres). 1950 production of 694,000 tons 
was the post-war high. 1951 production was reduced to 
about 610,000 tons. Indonesia is now a larger producer of 
rubber than Malaya. Other agricultural products of im- 
portance to the Malay economy are palm oil and kernels, 
coconuts, copra, and tea. 

Of the agricultural products rubber is by far the most 
important -one, providing, along with tin, the bulk of 
Malay's foreign exchange earnings. Much of the rubber 
and tin are exported to hard currency areas ( dollar areas ) 
and the resulting dollar exchange goes into the Sterling 
Area dollar pool in London. Only a small proportion of 
this is allowed to be spent on dollar imports into Malaya. 
During the post-war period Malaya has been the largest 
net dollar earner in the entire Sterling Area, and this fact, 
aside from strategic considerations, accounts for the Brit- 
ish desire to maintain the Malay Federation under British 
rule. 

The Malayan rice deficit has been running at about 
500,000 tons annually, despite efforts to increase domestic 
production. During periods of high world prices for rub- 
ber and tin this has been no serious disadvantage, but the 
fluctuations on the world markets have made the Malay 
economy peculiarly dependent on the world market 
prices of these commodities. 




Minerals 

The mining industrv of the Mai 
revolves around tin. Ilmenite and iron are i 
erals which figure in export trade from Mal^ 
which is the by-product of tin production in some of the 
Malayan deposits, is the source of titanium, a recent ar- 
rival in the group of important metals. In 1949 as much as 
20,000 tons of ilmenite was exported, and the exports 
could be stepped up, should the need arise, by reworking 
some of the waste materials from tin production. 

Malayan tin, long one of the important products of the 
Malay economy, has historically supplied between one- 
half and one-third of the world supply. The country is the 
largest single producer of this mineral. Despite banditry 
and terrorism in Malaya, tin production has not suffered 
excessively although the tin mining centers are provided 
with special police protection. In fact, the last few years 
have shown an increase in tin production and the average 
pre-war production has been exceeded. The peak year of 
Malayan tin production was 1940 when 84,000 tons (tin 
content) were mined. The production of 58,460 tons of tin 
in 1950 was 130% of the 1938 production rate. The 1951 
production is expected to be slightly lower than during 
the previous year. 

The bulk of tin is obtained from dredging operations, 
although other methods are also employed. 

Since 1921 Malaya has been a producer of iron ore, 
exporting as much as 2 million tons a year just prior to 
World War II. During the war all ore was exported to 
Japan, and after the end of the occupation the mines were 
in need of rehabilitation. By 1949, however, exports had 
again reached a level of 460,000 tons of iron ore, and 1951 
production was expected to reach 850,000 tons. The search 
for and development of new deposits of iron ore is going 
on. Although her reserves are not large, there have been 
five different deposits found, some of which are now near 
exhaustion. One of the known deposits is expected to 
yield 30 million tons. 

Malaya is the only country of Southeast Asia which is 
usually self-sufficient in coal, although all production (a 
cumulative total of about 12,000,000 tons) has come from 
one mine. During the past year production has declined, 
due to labor shortages and equipment failures, and im- 
ports were required to supplement domestic production. 
Altogether three areas with known coal deposits have 
been found. Since the coal mined in Malaya is lignite, it 
is not suitable for iron and steel production and its eco- 
nomic uses are limited to heating and power generating 
purposes. 

Although Malaya mined as much as 1,639 metric tons of 
tungsten (in 1936) production since the war has been 
very small. Several deposits are known and have been 
mined, but the tungsten resources of the Federation are 
not of major nature. 

25 



Hydro-electric power 

Malaya suffers from an acute shortage of electric power. 
Only 29% of Malaya's electric power comes from hydro- 
electric developments, and most of this (about 92%) was 
privately owned. The power installations have suffered 
war damage which was slow to be repaired. In some cases 
domestic industries, tin and rubber, had to curtail opera- 
tions somewhat, due to the shortage of power. The total 
shortage of capacity, including the power needs of antici- 
pated new industries has been estimated at 120,000 kw. 

A rather ambitious expansion program, to link up the 
present systems and expand the use of hydro-electric 
power, is slowed by the civil strife and the attendant 
budgetary difficulties. The expansion of the hydro-electric 
generating facilities will take an estimated eight years, 
and no immediate alleviation of the shortage is an- 
ticipated. 

INDO-CHINA 

Although administratively Indo-China has been broken 
up into separate entities, Vietnam, Laos, and Cambodia, 
for the purposes of this section the resources of the area 
will be treated as one, except where special treatment is 
required. 

Agriculture 

The basis of the peasant economy of Indo-China is rice. 
Constituting 90% of the people's diet, rice also made up 
about 35% of the pre-war exports of French Indo-China. 
Surplus rice production, however, is not typical of all 
sections of the area; the less populated fertile deltas of 
the Red River in the North (now part of Vietnam) and 
of the Mekong River in the South, contribute their share 
not only to the rice going into export but also supply the 
deficit areas in the overpopulated regions of Annam and 
Tonking, both of which are part of Vietnam. The southern 
end of the Vietnamese State, Cochinchina, embraces the 
delta of the Mekong River, and the entire crop of many 
of the Cochinchinese provinces consists of rice. 

The amount of rice which is annually available for ex- 
ports depends not only on the local political situation, 
which has been unsettled and chaotic, particularly in 
North Vietnam, but also, to a great extent on the climatic 
conditions. Large variations in the amount of the annual 
harvests is not at all uncommon. In recent years rice 
exports have varied from just over 100,000 tons ( metric, 
cleaned basis) to an expected 300,000 tons in 1951. This 
has been an encouraging sign, but compared with pre-war 
exports, Indo-China has lost much ground; the 1934-39 
annual average rice exports amounted to almost 1.3 mil- 
lion tons. 

Another agricultural crop of major importance is rubber 
which is produced on estates financed by French com- 



panies. Before the war Indo-China accounted for about 
2% of the world's output of rubber. During the post-war 
period the recovery of rubber has been encouraging, 
despite the political chaos. Rubber production in 1938 
was about 60,000 metric tons; the post-war period has 
been characterized by a slow recovery so that in 1950 
rubber production reached 48,000 tons. Most Indo- 
Chinese rubber is exported. 

Other agricultural crops of Indo-China are cotton, 
coffee, tea, sugar and pepper. In addition the dense for- 
ests of the area contribute ebony, mahogany, cinnamon, 
and cinchona, the basic raw material for the production 
of quinine. Fishing is an important industry, contributing 
not only to the export trade of the Associated States of 
Indo-China, but supplementing the diets of the people. 

Minerals 

Indo-China is not richly endowed in mineral resources, 
but she does have one asset that most of the other nations 
of Southeast Asia lack. Her coal resources, found in 
North Vietnam, have produced as much as 2,335,000 tons 
a year (1938). During the postwar period recovery of 
coal mining has been slow. Since most of the civil war 
is taking place in North Vietnam, rehabilitation and 
development of new coal production facilities has been 
severely hampered. The production of 250,000 tons in 
1947, however, was almost doubled in 1950. Expecta- 
tions for 1950, of more than 700,000 tons of coal pro- 
duction, have not materialized, mainly due to the civil 
disorders. 

Contrary to the poor qualities of coal found in the 
other countries of the area, the main deposits in Indo- 
China consist of anthracite and bituminous coal, although 
some small deposits of lignite have also been found. 

Indo-China is also fortunate to have several high grade 
deposits of iron ore. Hematite and magnetite deposits, 
consisting of 50-60% iron, have been found and are being 
worked in North Vietnam. Production, however, has been 
on a very small scale, amounting to only 21,975 tons in 
1944, recent figures not being available. 

Before the war Indo-China produced a fair amount 
of tin, production averaging about 1,500 tons a year. 
Since the war, however, there has been little recovery 
of the tin industry; in 1949, for example, total tin pro- 
duction did not amount to more than 60 tons. Zinc and 
tungsten are produced in minor quantities. 

Hydro-electric power 

Very little information is available on the electric 
power-generating facilities in Indo-China. Pre-war power 
production has increased by about 180%, but in the main 
the power facilities are restricted to the urban areas and 
to the industries. The shortages, less acute than in the 
other countries, are being eliminated by the construction 
of generating plants. The present political upheavals 



26 






however prevent active planning for the exploitation of 
the available water power resources. Indo-China is only 
second to Burma in water power potential, the total being 
estimated at about 36,000 million kwh. As in the other 
countries of Southeast Asia, only a very minor percentage 
of this potential power is presently being utilized. 

INDONESIA 
Agriculture 

The Republic of Indonesia is blessed with a rather 
diverse agricultural economy. As in the other countries 
of the area, Indonesia relies mainly on rice as the staple 
diet. Although the largest producer of rice in Southeast 
Asia, Indonesia has recently not been self-sufficient. 
Before the war, Indonesia generally was a net exporter 
of rice, although exports were not large. The increase in 
the Indonesian population, and the civil disorders of 
recent years have reduced her rice production. Only 
during the last year or two has she been able to approach 
the production totals of the prewar years. In 1950 Indo- 
nesia outstripped the 1930-40 annual average rice pro- 
duction by a half million tons, but she still had a deficit 
of a half million tons which had to be covered by imports. 

Much of the Indonesian agricultural policy is directed 
toward increasing the acreage as well as the yield of rice, 
and for this purpose new strains of seeds are grown and 
new areas are being brought into production. In the 
meantime however Indonesia's food deficit has had to be 
covered by imports of rice from Burma, Thailand, and 
even the United States. 

The agricultural raw materials which Indonesia con- 
tributed to the trade of the world have been varied and 
important. Pre-war the Netherlands East Indies supplied 
one third of the world's rubber, palm oil and coconut 
products, and sisal, two fifths of the world's kapok, four 
fifths of the world's pepper ( most of the rest coming from 
Indo-China), and one fifth of the world's tea. She 
also supplied important amounts of coffee, sugar and 
cinchona. 

Although rice production has returned roughly to the 
pre-war level, and rubber production has exceeded it, 
the production of other export commodities has been 
slow to recover. Copra production, although greatly in- 
creased since 1950, is still below prewar; palm oil and 
kernel production are about 70% of prewar. Coffee pro- 
duction has been very slow to rise. Two other com- 
modities which formerly loomed large in Indonesian 
exports have lost their importance in world trade: 
cinchona has had to give way, to a large degree, to 
synthetic anti-malaria drugs, and kapok has had to fight 
the competition of fiberglass. Whether these commodities 
will become entirely surplus in the near future is diffi- 
cult to forecast. For the present it seems clear, however, 



that these two commodities will not again resume their 
important place in Indonesian export trade. 

One of the agricultural commodities which quickly 
resumed its prewar eminence in the exports from South- 
east Asia was rubber. As early as 1947 the various 
rubber producing countries restored pre-war production 
levels and by 1948 rubber production exceeded the pre- 
vious year by 20%. 

Despite the slump in rubber exports in 1949, Indonesia 
steadily increased her productive capacity. While in 
Indonesia internal stability began to return, civil strife 
in Malaya took a turn for the worse. The communist 
insurgents in Malaya have been able to substantially 
reduce rubber production, and Indonesia has taken her 
place as the world's principal supplier. 

Whereas Indonesia exported 440 thousand and 305 
thousand tons of rubber in 1937 and 1938 respectively, 
her exports in 1950 reached 681 thousand metric tons. 
This compared with Malayan exports of 668 thousand 
tons in 1950. 

Whether Indonesia will be able to maintain its place 
as the major supplier of rubber to the world market 
remains to be seen. To a large degree it will depend on 
the events in Malaya where the recently undertaken 
stronger course of action against the communists has 
still to bear fruit. 

Minerals 

In the field of minerals the main commodities exported 
from the Republic of Indonesia are bauxite, the raw 
material for aluminum, tin, and petroleum. Recovery 
from the early post-war slump has been rapid, and 
bauxite production already exceeds the pre-war average. 
Petroleum has recovered its pre-war standing, and tin 
production is slightly above pre-war. 

The bauxite industry is concentrated on two islands of 
the Indonesian Archipelago, Bintan and Kojang. The 
first is the larger producer, and the second produces 
better quality bauxite. Recently almost all Indonesian 
bauxite has been exported to the United States and to 
Japan. 

The recent increase in the bauxite production of Indo- 
nesia is shown by the following figures: during the first 
eight months of 1950 bauxite production amounted to 
more than 370,000 tons, 40% more than the total annual 
production in 1940. 

Tin production, which takes place on three small 
islands of the archipelago, Billiton, Bangka, and Sing- 
kep, has reached 108% of 1938 in 1950. The operation on 
Bangka is owned outright by the Indonesian government, 
the other two enterprises are partly government owned. 

Prior to the war, some of the tin was smelted on the 
island of Bangka, but the smelter did not resume opera- 
tion after the war. The ore is now exported to the 

27 



Netherlands and to the United States for smelting and 
resale on world markets. 

Although Indonesia is blessed with coal deposits on 
Sumatra, Borneo and Celebes, the deposits are all 
lignites of low calorific value. Production has not re- 
covered to pre-war levels due to lack of machinery and 
transport equipment, and due to the low economic 
value of the coal mined. 1950 coal production had 
recovered to only slightly more than half of the 1938 
production of 1.46 million metric tons. The most im- 
portant mines, located on the island of Sumatra, are 
government owned. 

In regard to iron ore, Indonesia is well endowed quan- 
titatively, having the largest resources of iron ore of 
any of the Southeast Asian countries. Qualitatively, Indo- 
nesia iron ore requires special smelting processes which 
at present are uneconomic. High grade resources of iron 
ore are very small. 

Attempts to foster a domestic steel industry have 
foundered on the problem of converting the domestically 
mined coal into usable coke for blast furnace use. Con- 
sequently the future of a steel industry is bleak. 

In contrast to the other countries of Southeast Asia, 
Indonesia has fairly substantial resources of sulphur. 
These are being exploited now for use in oil refineries 
which require sulphuric acid in substantial quantities. 

The production of petroleum, which received its 
greatest impetus in the years just prior to the outbreak 
of World War II, has been characterized by rapid recov- 
ery and expansion. 

Indonesia is, by far, the most important exporter and 
producer of petroleum and its byproducts in the Far 
East. By 1949 it had regained the export level of the 



best prewar years, and this was accomplished without 
complete reconstruction of all damaged and destroyed 
facilities. In 1950 she exported 5.584 million metric tons 
of petroleum products. In barrels, Indonesian production 
in 1949 amounted to almost 45 million barrels. 

In South Sumatra, on Borneo, and on Surabaya, there 
are petroleum refineries which refine not only domestic 
crudes, but also crude oil produced in British Borneo and 
Sarawak, both important producers of crude. 

Not alone in present-day production, but also in pe- 
troleum reserves, Indonesia stands out among the coun- 
tries of Southeast Asia. Compared with Burma's reserves 
of 50 million barrels, Indonesia can boast 1 billion, 100 
million barrels of estimated reserves (1950); in terms of 
percentage of world reserves these figures amount to 
0.06% and 1.43% respectively. 

Hydro-electric power 

Installed electric generating capacity in 1949 amounted 
to 140.4 thousand kw. of which about 26% was produced 
with water power. Rehabilitation and extension of exist- 
ing facilities is the primary need in Indonesia, and the 
government has undertaken a five-year program looking 
toward a 100 thousand kw. increase in generating capac- 
ity. Part of this five-year plan will probably be financed 
by the Export-Import Bank of Washington. 

As in the other nations of Southeast Asia, the estimates 
of the available water resources for hydro-electric power 
are spotty and not very reliable. The best estimates place 
Indonesia's hydro-electric resources at 26 billion kwh. 
firm potential power per year. At present only a very tiny 
fraction of this is being utilized. 



28 






A NOTE ON SOURCE MATERIAL 

This study purposely omits detailed statistics and ac- 
counts of the various types of restrictions on trade and 
payments in the countries treated. There are several rea- 
sons for this omission: 

1. It is impossible to be sufficiently up to date to be 
of use to the businessman who wants to establish 
commercial contacts with the countries or who 
wishes to invest capital. For his purposes only the 
most accurate and up-to-date material would be of 
value, while for the average reader it would be bur- 
densome material. 

2. It would unnecessarily increase the bulk of an al- 
ready extensive document. 

3. The unsettled conditions in most of the countries 
produce constant changes which are not always 
quickly known in the United States, thus preventing 
an accurate survey as of a certain recent date. 

4. The dissemination of such information is properly 
the function of many trade organizations, banks, 
and government departments. 

Bibliographical Note 

The attached bibliography lists the most important 
source material consulted in the preparation of this study. 



BIBLIOGRAPHY 

Brookings Institution, Washington, D. C. 

Major Problems of United States Foreign Policy 1950/51, 
1951/52 



Langer, William L. 
An Encyclopedia of World History, Houghton Mifflin Co. 
1948 

Mills, Lenox A. and Associates 

The New World of Southeast Asia, U. of Minnesota Press 

Thompson, Virginia and Adloff, Richard 

The Leftwing in Southeast Asia, Will. Sloane Ass. 1950 

Statesman's Yearbook, 1949, 1950 Macmillan 

United Nations 

ECAFE, Electric Power Resources and Needs of ECAFE 
Countries Feb. 15, 1950 
Report on Coal and Iron Ore Studies March 25, 

1950 
Postwar Development of Mineral Resources in 
Asia and the Far East May 1, 1951 
Economic Survey of Asia and the Far East, 1949, 1950 

United States Department of the Interior, Bureau of Mines, 
Minerals Yearbook 1948, 1949 

United States Department of Commerce, Foreign Commerce 
Yearbook 1949 

United States Senate Document 8, 82nd Congress, 1st Session 
Basic Data Relating to Energy Resources 

The New York Times 

The Christian Science Monitor 

The Wall Street Journal 

The Journal of Commerce 

The Economist, London 

Foreign Policy Bulletin, Foreign Policy Association 

Foreign Affairs Quarterly 

Annals of the American Academy of Political and Social Sci- 
ences, March, July, 1950; July, September, 1951. 

Brookings Institution, Current Developments in U. S. Foreign 
Policy 



29 



Foreign Commerce Department Committee 

1951-52 



Richard L. Bowditch, Chairman 
President, C. H. Sprague & Son Company 



"Walter J. Braunschweiger 
Executive Vice President 
Bank of America 

Horace S. Cleveland 
Pleasureville, Kentucky 

John S. Coleman, President 
Burroughs Adding Machine Company 

"J. F. Curtis, President 
The Coca-Cola Export Corporation 

"C. E. Dalton, Regional Director for Europe, Middle 
and Near East 
Ford International 

H. A. Davies, Director-General 
Latin American Operations 
International Harvester Company 

""Paul Dietz, Manager 
Export Department 
General Machinery Division 
Allis-Chalmers Manufacturing Company 

Henry W. Farntjm, Vice President 
Insurance Company of North America 

E. W. Faulk, Vice President 

The Merchants National Bank of Mobile 

J. D. Helthall, Executive Vice President 
Schenley International Corporation 

*W. L. Hemingway, Chairman of the Board 
Mercantile-Commerce Bank and Trust Company 

Dr. O. B. Jesness, Chief 
Division of Agricultural Economics 
University of Minnesota Farm 

R. A. Liggett 

Vice Chairman of the Board 

First National Bank of Tampa 

"John L. Locke, President 
Fisher Flouring Mills Co. 

W. H. Lukens, Vice President and General Sales 

Manager 
R. M. Hollingshead Corporation 

August Maffry, Vice President 
Irving Trust Company 

"E. H. Martindale 
The Martindale Electric Co. 

Stacy May 

International Basic Economy Corp. 

Charles A. Meyer 
Foreign Administration 
Sears, Roebuck and Co. 



G. H. Michler, Executive in Charge of Foreign 

Government Relations 
Standard Oil Company of New Jersey 

Sydnor Oden 
Anderson, Clayton & Co. 

°George E. Quisenberry, Vice President 
McGraw-Hill International Corporation 

R. R. Reger, Manager of Export Sales 
Sperry Gyroscope Company 

Morris S. Rosenthal, President 
Stein, Hall & Co., Inc. 

Henry J. Seesselberg, President 
Wessel, Duval & Company 

*John H. Sheehan, Head 
Department of Economics 
University of Notre Dame 

Fred G. Singer 

Development Department 

E. I. du Pont de Nemours & Co., Inc. 

A. B. Sparboe, Division President 
Flour Milling Division 
Pillsbury Mills, Inc. 

James H. Stebbins, Vice President 
W. R. Grace & Company 

"Harold J. Steele, Vice President 
H. M. Newhall and Co. 

William R. Strelow, Vice President 
Guaranty Trust Company of New York 

William S. Swingle, President 
National Foreign Trade Council, Inc. 

*J. B. Thomas, Vice President 
International Editions, Inc. 
The Reader's Digest 

R. C. Thompson, Manager 

Export Division 

The Electric Auto-Lite Company 

Harry R. Tosdal 

Professor of Business Administration 

Harvard University 

"Howard I. Young, President 
American Zinc, Lead and Smelting Co. 

Kenneth H. Campbell, Secretary 
Manager, Foreign Commerce Department 
Chamber of Commerce of the USA 
Washington 6, D. C. 

Note: "* Chairman of the Southeast Asia Subcommittee. 
* Member of the Subcommittee. 



30 




A NATIONAL FEDERATION WORKING FOR 

GOOD CITIZENSHIP, GOOD GOVERNMENT AND GOOD BUSINESS